Stocks continued to soar today as the market cheered the "whisper numbers" that leaked out around the stress tests.
The financials took a rocket shot after sweating out an inaccurate news story around BofA losses that came out of The New York Times last evening. BTW, I am very disappointed with the reporting by the times on the BofA story last night. Make sure you have all the facts before you run your story. Its no wonder they are bankrupt!
The collapses on some of the leveraged ETF's have been remarkable: FAZ(3x short financials) is down to $5! SRS now sits at $20! The rally we are watching here is something that surely will be written about in the history books.
One thing that David Rosenberg noted today in his daily update was that back in the depression, the S&P bottomed in July of 1932 and then proceeded to rally 73% over the following 3 months before once again touching the lows later on.
Is history repeating itself here? I firmly believe so but every bear market is different. However, the only scenario that you can compare this meltdown to is The Great Depression. Its the only other time is history where we saw a debt bubble that was over 300% of GDP.
Therefore, I still believe this is a bear market rally circa 1932. New bull markets don't occur this quickly after what we just went through.
Let me post this reminder of how violent the trading was in The Great Depression as the market found its bottom:
The fundamentals haven't changed folks. The consumer remains weak. Housing is still in the dumps and is continuing to deflate. The economy is still bleeding jobs albeit at a slower pace. The market has been moving higher as the data continues to come in stronger than the previous month/quarter.
Well you know what folks? The last month/quarter was one of the worst ever so thats not saying much. The patient can only bleed so much before it loses its pulse.
This all being said, the Fed is in an all out war against deflation and the banks are now allowed to basically write their own rules. Short term its hard to bet against this combination.
The 960 area on the S&P is an interesting area to short because it represents the 200 day moving average. I had said earlier this week that the 950-1000 area on the S&P would be a nice level to place some SMALL bets on the short side. Let me repeat myself: SMALL.
I think we are seeing the same violence on the way up that we saw on the way down when we collapsed last fall. Perhaps we need to rewrite the old saying and change it from "The bigger they are the harder they fall" to "the harder they fall the bigger they get!"
My guess is the next retrace will take us back down with the same violence. This is why caution is a must here.
This market is nothing to mess around with folks. Step to the sidelines for the most part and just watch in awe.