Putting The Rally Into Perspective......A Record Bounce?

This is a follow up on my earlier posts But Still Better Than Expected........ & More On "The Less Bad Is Good" Mantra....... & Chart Of the Day "Today´s Rally vs Rally 1929/1930"

Wenn man so möchte ist dieses Posting ein Nachschlag zu meinen früheren Beiträgen But Still Better Than Expected........ & More On "The Less Bad Is Good" Mantra....... & Chart Of the Day "Today´s Rally vs Rally 1929/1930"


A RECORD BOUNCE? David Rosenberg

The S&P 500 has rebounded 49% from those March 9 lows. Imagine how abnormal a 49% rally over a five-month span is — it’s unprecedented back to the 1930s. In the last cycle, it didn’t happen until February 2004 — 18 months into that bull phase where again there was tremendous policy stimulus and an oversold low to climb out of.

In addition, household credit was expanding rapidly. Even coming into what was a secular bull market in 1982, it took a good seven months to rally 49%, and that was with the benefit of a V-shaped economic recovery.

Going back to 1950, it has taken an average of around 18 months for the market to rebound 49% from a recession trough, not five months as has been the case thus far.

Let’s examine what the macro landscape usually looks like at that magical +49% point in the equity market rally:

• Real GDP had expanded on average by 4.5%
• Employment rebounded an average of 850k
• The ISM manufacturing index had firmed to an average of 56.2 (the lowest print by this juncture was 53.9)
• Corporate profits had recovered 12%
• Bank lending rose an average of 5%

In other words, the market is way ahead of itself, because, as of the latest data points during this 49% rally:

• Real GDP is trying to make a cycle low
• Employment is trying to make a cycle low
• The ISM is off the low but still sub-50, at 48.9
• Corporate profits are still trying to make a cycle low
• Bank lending is still trying to make a cycle low

We have never before witnessed a stock market rally of this magnitude over such a short time frame and absent anything more than tentative signs of economic improvement.

The only rally of this magnitude was the wild bear market rally ride in 1930, which was followed by a resumption of the decline that finally bottomed 82% lower in 1932.

A VERY SPECULATIVE STOCK MARKET
This is the most speculative momentum-driven equity market since the early 1930s. Make no mistake, the economy is getting better but most of the diffusion indices are still below the 50 cutoff and many of the economic indicators are still in negative growth terrain

But what we have on our hands is a jobless, revenue-less, income-less, profitless and consumer-less recovery. It’s a one of a kind.

The equity market tends to bottom 3-6 months before the recession ends; normally it is four months. The S&P 500 bottomed in March, and we are now four months into this rally and while the media have declared the recession to have ended, none of the four classic ingredients that go into making that call have yet to bottom.

Hence, Mr. Market may well be way ahead of himself on this one. No doubt that the market was priced for extremely bad news at those March lows, but let’s face it, the news turned out to be pretty bad, especially for those 2.2 million people who lost their jobs since that time. That’s more than the entire March 2001-June 2003 down-cycle — in just five months.

> Just today three major German financial newspapers ( FT Germany, Handelsblatt und Welt ) had all bullish stories why stocks have room to climb higher.....At least they didn´t have their stories on the cover.... This would have triggered a perfect signal to short the market....;-) The FAZ seems to be regular readers of Zero Hedge and is therefore less "euphoric"......You really have to be brave to be long this market....... The risk/reward isn´t quite "balanced" right now......

> Im Vergleich ( DAX 5400 ) dazu die heutigen Artikel der FT ( siehe Acht Gründe, warum es weiter aufwärts gehen könnte. ) , der Welt ( siehe Die Börse beweist, dass die Krise bald vorbei ist) & des Handelsblattes ( siehe Charttechnik verspricht steigende Kurse ) Immerhin haben es die Beiträge nicht auf die Titelseiten geschafft...... Ansonsten wäre heute sicher der ideale Tag um short gehen..... :-) Lediglich die FAZ ( siehe Ohne Umsatzzuwachs keine Gewinnsteigerungen ) ist nicht ganz so euphorisch. Sieht so aus als wenn einige in der FAZ Zero Hedge Fans sind....... Ich bin mehr denn je der Meinung das wirklich nur ganz Wagemutige long sein sollten....Das Chance/Risikoprofil ist "ÜBELST"........

More On "The Less Bad Is Good" Mantra.......

The perfect fit to yesterdays post But Still Better Than Expected........ ....

Paßt wie die Faust aufs Auge zum gestrigen Post But Still Better Than Expected........

Refining, the weakest link in the recovery Stephen Schork via FT Alphaville

Demand, not only for gasoline, but for other major products markets as well, is going the wrong way, i.e. from the top left to the bottom right on the charts. Thus, Big Oil is straining under the weight of poor margins.

It is now hard to reconcile these earnings reports, demand was lousy in the second quarter (and it not any better today). Yet, this market was being fed a fantastic lie back then… the less bad is good mantra.

Thus, whereas spot crude oil on the NYMEX finished the first quarter just below $50 a barrel (49.66) it finished the second quarter just below $70 (69.89). Crude oil rallied 40 percent as profits at the world’s largest oil companies were tumbling.

Why?

Because this market wanted to ignore the obvious and lull itself to sleep with silly pseudo-intellectual catchphrases… green shoots, crocuses, mustard seeds and this season’s rookie of the year… the second derivative.

Thus, while we were led to believe that demand for oil was rising in the second quarter, hence the justification for that 40 percent surge on the NYMEX, we now have the balance sheets from Exxon, Shell et al. that prove it was a lie.

Look at the screenshot of headlines we pasted on the top of today’s report. Profits for Big Oil are down as demand is at generational lows.

However, look at the very first headline, the NYMEX was higher esterday because “… corporate earnings boost confidence…”

Huh?

According to this one article, demand for oil and therefore profits for oil companies are down, but the NYMEX rallied yesterday because Motorola (mobile phone maker) had a smaller than projected loss and Calphalon (cookware) and Paper Mate (writing instruments) had better than expected profits

.

You really cannot make this up......

Das ist so absurd das man sich unweigerlich fragt ob wir schon wieder den 1. April haben.... :-)