We suggested on July 15 in our blog entry regarding bear markets and crashes that we were starting a counter-trend rally within the context of a bear market that is likely to be severe, and perhaps even provide enough decline to be called a crash.
No one can know for certain, but the rally will likely fade soon, if not already. Typically prices will run up to a major overhead resistance level and then fall back as the insiders continue to sell stocks to the 'greater fools' and raise more liquidity. Remember in a bear market its the three L's: liquidity, liquidity, liquidity.
Below are some updated charts to show the progress of the rally so far.
We also include the US dollar chart to show that despite some of the rah-rah cheerleading it is still quite weak, and has not nullified the short term H&S top that indicates a decline down to 68.30 if the neckline is broken. We are adding to our contra-dollar positions on weakness. Positions in gold and oil were sold today as part of the liquidity process we think by desperate banks and hedge funds, although we just had an option expiry for oil, and tomorrow is option expiration for stocks. The merry prankster games are in full swing even in hard times.
By the way, the accounting on some of the earnings results we saw on JPM and Wells Fargo was interesting to say the least. Citibank may provide the same balance sheet maneuvers tomorrow. Merrill was a disaster after hours today. This is not over, not even close, not even halfway, despite the smokescreen being generated by the Fed.
And the announcement by the SEC to ban naked short selling on the financials is a selective enforcement of market rules. Its is embarrassing that they provide this level of attention only after it affect a certain class of investors and stocks. It is a disgrace in an ongoing series of disgraceful lapses by the US market regulators.
