Bearish Victory Will Be Short Lived

By iamned - Last updated: Tuesday, April 21, 2009 - Save & Share - 9 Comments

Yesterday was a day of celebration for short sellers, pessimists, and doom and gloomers. However, little do they realize that their victory will be short lived and the indexes will resume their march higher. This rally has legs. No meltdown, no retest of lows, no more doom and gloom. Bernanke, Obama, and Geithner are doing a good job infusing liquidity and bailing out the too big to fail so that investor confidence rises, in addition to the stock market. So far it’s working. Don’t fight the fed. I wonder how many people have shorted yesterday? And how many will have covered in panic by Friday?

In the 2003-2007 bull market there was a sharp, albeit brief selloff in late March, which many bears mistakenly interpreted as a major reversal. Nope. The rally continued to their dismay, and they were forced to cover.

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There is still considerable support on the SPX as shown from the chart below:

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here is a similar chart for the SPY showing support:

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Here is another chart showing two different outcomes for how the market will rally. The green projection is more conservative with the DJIA retesting 7500.

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There will be no decoupling. Just like in the 2002-2007 bull market oil, gas prices,wheat, soybeans,corn, copper, United States & BRIC indexes will all rise together. The dollar will resume its long term decline, which began in 2001.

The US dollar index is forming a head and shoulders and is due for a major retracement; a very bad sign for bears as risk taking returns and the over hyped recession comes to a close:

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As the dollar plunges and stock and commodities surge, gas prices will also rally. I expect to see $4 gas again within eighteen months, but it will have no impact on consumer demand because people still need to get to work and travel for leisure, and gas prices are considered inelastic. According to investopedia: When a price change has no effect on the supply and demand of a good or service, it is considered perfectly inelastic.

The UGA gas prices etf is a good proxy for national gas prices

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In conclusion, I expect commodities, BRIC, US indexes to resume their rally. The dollar will plunge, and there will be a lot of panic covering in the days and weeks to come as shorts scramble to secure what little profit they extracted from Monday’s big sell off. Buy Google, Apple, Rimm, Amzn, EWZ, FXI, Pot, Mos, and other cheap dollar, globalist, plays on the dips.

I signed up for twitter, too
http://twitter.com/iamned

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9 Responses to “Bearish Victory Will Be Short Lived”

Comment from Jay
Time April 21, 2009 at 3:29 pm

Hi,

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Comment from Administrator
Time April 21, 2009 at 9:56 pm

thanks for your help. it looks good.

Comment from stats79
Time April 22, 2009 at 2:11 am

Just wait, you’ll be proven wrong. Why? Because past history shows that you are always wrong. Given todays post I should short the hell out of this market.

Comment from Stepantstring
Time April 22, 2009 at 2:51 am

I like your stock picks, agree with most of them.

However, I don’t see how higher energy and foods costs are going to resuscitate an over-leveraged consumer. Sure the savings rate may fall to zero as people have to make the choice between the piggy bank or a ham sandwich, but where is the job growth going to come from?

Do we need any more houses, cars, office buildings, strip centers, malls or stadiums in which to watch monster rallies?

Whole industries have been dislocated and will never return to normal after the regulatory hounds in Congress are done duct taping capitalism in a chair with higher taxes or nationalized competition.

Also, keep an eye on Amazon and Apple (as itunes would detonate) as various bills are introduced next week to waive the “physical presence” rule invoking sales taxes on all internet transactions. State budgets are distressed and this would be an easy way for them to recharge their coffers.

Comment from Administrator
Time April 22, 2009 at 2:03 pm

Thanks for your comment. yea..those are good picks. I Own Pot, MA, and GOOG because they are immune to the recession, market dominance, and huge growth. Good luck to you, too. Job growth isn’t as important if efficiency is improved.

@Stepantstring

Stepantstring :

I like your stock picks, agree with most of them.

However, I don’t see how higher energy and foods costs are going to resuscitate an over-leveraged consumer. Sure the savings rate may fall to zero as people have to make the choice between the piggy bank or a ham sandwich, but where is the job growth going to come from?

Do we need any more houses, cars, office buildings, strip centers, malls or stadiums in which to watch monster rallies?

Whole industries have been dislocated and will never return to normal after the regulatory hounds in Congress are done duct taping capitalism in a chair with higher taxes or nationalized competition.

Also, keep an eye on Amazon and Apple (as itunes would detonate) as various bills are introduced next week to waive the “physical presence” rule invoking sales taxes on all internet transactions. State budgets are distressed and this would be an easy way for them to recharge their coffers.

Comment from David
Time April 23, 2009 at 4:33 am

2003 is very different from now.

Comment from TJ
Time April 23, 2009 at 5:25 pm

The S&P500 formation you draw (the 2nd chart with a rising triangle) is called a “bearish pennant”, a classic bear market continuation pattern.

http://www.tradingpricepatterns.com/bearish-pennant/
http://www.stocks-simplified.com/bearish_pennant.html

Breakdown below the rising support line on high volume is rather bearish.

Comment from ned (administrator)
Time April 24, 2009 at 2:15 am

We will see…so far this week isn’t as good as I had hoped.

Comment from Administrator
Time May 4, 2009 at 8:00 pm

This article was spot on. If you fight the bullishness you will get burned.

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