The stock market ran out of steam today following last weeks impressive short covering rally. This seems par for the course as nervous shorts take profits but with the market lacking real buyers, the rally then fizzles after a few days.
We may see another attempt by the bulls to perhaps test the 50-day moving average, but nothing has changed that signals the birth of a new bull market.
This has been the pattern. Whenever pessimism gets too extreme, the Fed releases something to scare the shorts into covering, as we saw with the “Mark to the Market” talk and with the suggestion of changing the uptick rules to spook the shorts. It worked.
However, for the market to be sustainable on the long side there needs to be a reason to expect economic growth to attract a steady flow of buyers. I sure don’t see it.
The March and April period is a favorable seasonality period that could repeat this year. After last week’s advance the intermediate-term cycle seems poised to climb if one looks at the weekly stochastics and the McClellan Summation Index, which appear to be nesting here.
Yet, after last week’s advance, short-term cycles have moved into overbought territory again. It looks to me like we are setting up for another retest of the lows.
Remember, the primary trend pattern remains the same, lower highs and lower lows. The Nasdaq Composite has retraced in the latest rally about 50% of what has been lot from the peaks in early 2009, so we are running into short term resistance levels.
TRUST BROKEN
I have told you before that I was a stock broker for 12 years with Shearson Lehman Hutton in the 1980’s. I was vested in their retirement program, which Lehman managed.
I got a letter the other day from Lehman Brothers, which said if you have any questions about changes to your retirement plan, contact the new Plan Administrator of Lehman Brothers Holdings Inc. Retirement Plan at 1-800-LEHMAN6
If you call that number it says, “We’re sorry, your call can not be completed as dialed. Please check the number”. I guess I have to say I am not surprised.
The smartest business decision I made was to leave this firm back in 1989. There used to be a saying at Shearson Lehman Hutton: “The brokerage firm makes money, the stock broker makes money and two out of three ain’t bad!”
This is the attitude that led this firm to ruin because they put their interests ahead of their investors. They had little regard about risk their clients faced and it was reason why I left this firm.
Trust is the foundation of our financial system. Two years ago when Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told us everything is okay, don’t worry, forget housing, forget soaring crude oil prices—look at how strong the economy is--- I knew we were in deep trouble. They knew then we were in deep trouble.
This is the heart of the problem---you can’t trust anything they say.
Today we learn the AIG was set to pay out $165 million in retention bonuses.
“ I was happy to see that AIG finally handed over the counterparty information we’ve been requesting for months,” said Representative Elijah Cummings, a Maryland Democrat on the House Oversight Committee. “However, I am deeply concerned that Goldman Sachs received so much money from AIG considering the relationships between the two companies. We will certainly be investigating this further to ensure that this is merely a coincidence.” Bloomberg
Yeah that is what it is alright, just merely a coincidence. It is merely a coincidence too that Former Treasury Secretary Robert Rubin under the Clinton days was a former arbitrage trader with Goldman Sachs, that Treasury Secretary Henry Paulson was a former head of Goldman Sachs.
I guess it is a mere coincidence that our present Treasury Secretary Timothy Geithner is a former protégé of Robert Rubin and his chief of staff is a former lobbyist for Goldman Sachs.
… just a mere coincidence.
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