Bears Should Beware

I'm going to go through some signs that rabid bears might do well to pay attention to because I think the market is very close to a major bottom. (That doesn't mean we are guaranteed to make new highs, although we might. Just that we can probably expect an explosive rally soon, even if it ultimately turns out to be a counter trend rally in an ongoing bear market).

First off, way too many people are counting on the head and shoulders pattern taking the market directly down to 850. Folks, historically these head and shoulder patterns have a success rate of about 50%. A coin toss, in other words. Didn't we learn that lesson last July?

Let’s go now to the charts. We have a large momentum divergence that has developed on the daily charts. (more)

Bond rally reflects gloom - but don't bet on it lasting

NEW YORK (MarketWatch) -- The recent steep rally in U.S. Treasury bonds, helped by investor jitters over European debt and weakening U.S. economic data, isn't likely to last, say some bond investors and strategists.

They expect longer-term rates to rise in coming months as investors pull back from bonds -- whose prices rise when their yields fall -- because growth turns out to be better than markets anticipate. This shift should support the stock market.

Short-term Treasury yields dropped to a new record low in recent sessions as bad news piled up about consumer confidence, manufacturing and the job market. In the six months ended Wednesday, an index of Treasury debt had the biggest half-year gains since 1995.

And with investors leaning toward longer-duration Treasurys, the yield curve flattened; in severe cases, the shrinking between short and long-term yields has been a harbinger of recession. (more)

The Homeless Recovery?

No, this does refer to some type of improvement in the homeless problem domestically. Unfortunately with what is happening both in residential real estate and labor markets, that problem probably gets worse before it gets better. It has been some time since I have looked at the National Association of Home Builders housing index numbers, but believe it's important to do so now. Especially given the ECRI message of the moment showing us the potential for a proverbial double dip in the macro economy itself. You already know the recent NAHB monthly reading in the now absence of the homebuyer tax credit was not good at all. Same deal with month over month new and existing home sales. But as I have done in the past, looking at the NAHB numbers in isolation is not the key issue. As I have shown you in prior discussions and is important now, the NAHB data has shown us its own leading tendencies historically that have proven to be important watch points. Will it be so again? (more)

Seven Reasons the S&P 500 Is Going to 1500

The S&P 500 may be headed downward right now, but here are seven reasons to believe it will go up. Way up.

One: International Paper and Georgia Pacific just raised prices on containerboard. Forget about all government data for a second. Why would the two companies involved in every shipment made around the world increase prices? Because demand is there.

Two: Consensus among analysts for S&P earnings for 2011 is $94. With the S&P near 1050 that puts us barely above a multiple of 11 times earnings with the historical average somewhere near 15.

Three: We are still in the middle of an inventory rebuild after the Great Liquidation that wiped out all inventories in 2009. And corporate profits are still near all-time highs, in part due to the enormously slack labor market created by 10% unemployment. In fact, corporate profits at their highest levels ever: (more)

7.9 million jobs lost - many forever

The recession killed off 7.9 million jobs. It's increasingly likely that many will never come back.

The government jobs report issued Friday shows that businesses have slowed their pace of hiring to a relative trickle.

"The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.

Excluding temporary Census workers, the economy has added fewer than 100,000 jobs a month this year -- a much faster and stronger jobs recovery than occurred following the last two recessions in 2001 and 1991. (more)

Bloomberg Businessweek - 05-11 July 2010

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