Thursday Market update

The powers that be want us to believe that we have seen the worst of the recession and that from this point forward, things will worsen just a little bit less.

Today we saw a small improvement, but still an improvement in the ISM manufacturing data index, which increased to 36.3 in March from February's 35.8. Bottom line---manufacturing is still deeply contracting (below 50), but just a bit more slowly.

Also, we heard that sales of existing homes climbed 2.1% in February to 82.1, which hints that sales of existing homes might have passed their trough.

Last month we saw new homes sales also increase, which is leading some investors to go back into the water again.

The government is also touting that we are about to see an improvement in bank earnings, due to their incredibly clever maneuvering, so they want us to be convinced that it is not going to get any worse than this.

I am sorry but Treasury Secretary Timothy Geithner and Ben Bernanke remind me of the town promoters of Amity in the movie Jaws, trying to get the people to get back into the water again.

" You yell barracuda, everybody says, 'Huh, what?' You yell shark, and we got a panic on our hands on the Fourth of July."

Tell me if this wasn’t Hank Paulson’s and Ben Bernanke’s attitude just a few months ago and by the way, tell me why should we believe that Geithner is any different, Mr. Credibility Banker who forgot to pay his income taxes?

These town promoters could care less whether you swim in shark infested waters or not. This is about getting you to come to the beach and spend your money again.

I guess I have become too cynical. You get that way after half of the people swimming with you have disappeared. Just look at yesterday’s four bear market chart and tell me why we now should believe we should be swimming?

I am no different than you. I want Jaws to be dead, but how many times have we seen Jaws come back again, just as soon as people start to wade out in the water over the last 17 months, after the town promoters have told us everything is just fine?

Technically, the market has not proven itself. We still see lower lows and lower highs between intermediate-term cycles. I hope that changes, but it hasn’t yet.

With the McClellan Summation Index still trending below zero, I would rather bet that Jaws has not been captured or killed.

I am in the camp that there may eventually be light at the end of the tunnel---just not as soon and fast as the town promoters make it out to be.

Take up running and avoid swimming for now.