Top Line: Late Friday the stock market reversed its down move late in the day creating a perfect setup for a last late chance to sell some stock. The main trend is down and this little rally is only some minor noise, again.
The world seems to want to allow the market to go up since it's been down since October. Since the January lows, there has been a little corrective rally that has now run its course. That is not what Wall Street expects and is certainly not what the Fed has spent all of these bullets to achieve.
Speaking of the Fed, the futures market has priced in a nearly one hundred percent probability for a half point cut in the funds rate at their March meeting. Then there is the near certainty of the Fed lowering rates to 2% by summer sometime from 3% today. We're pretty sure that the Fed has no shame saying that the economy won't go into a recession this year, and all the while driving rates down. More and more people are starting to think recession which makes it near certainty just because of that.
The market's sudden turn around on Friday was inspired by a Rumor that one of the bond insurers, Ambac, was going to get some capital, uh from somewhere, early this week. The general feel in the market has a lot of expectations, we would call it speculation, that the bottom is in. As the self appointed contrarian in the room, we think the notion that the market feels like the "bottom is in" means that the bottom Can't be in.
We would enjoy seeing a rally going into the beginning of the week. The market has every right to go up or down, but given the position of the technicals, would think any rally should be sold. This week has the honor of being the last of the month and usually has an upside bias so we'll have to see.
One of our readers, thanks CM, sent us a link to a chart that seems like something we should share. This chart has to do with the value of the Dow in "real" dollars, that would be gold. The people over at Elliott Wave International have been showing this chart for a while now so here it is in your daily read. This chart shows that the Dow has been in a slow bear market for a long time when compared with the price of gold.