Top Line: The stock market has undergone an amazing metamorphosis with a down move being reversed to up over the last few trading sessions. We think the up move still has a ways to go but we don't have any long positions due to this being what should be only a countertrend rally.
The Asain markets and our own futures are up this evening with confident expectations for a rally in the US on Monday morning. With confidence growing out of pessimism, we are waiting until the last of the new bears has turned into a bull.
In the early stages of a turn there are many who think the last move is just about to re-emerge. In this case they sell the rallies keeping the early stages of the rally from going too far. Finally, when the downturn just never comes, these new bears will start to think bullish thoughts again. This may be due to the fact that they have sold all they can sell. The upswing can then get into gear with fewer sellers around. Soon, we will be reading only about very bullish things and it is then that we will want to begin our quest for shorting again.
As for Friday's trading, GOOG did spark a big rally on Wall Street and was up about 20% all by itself. GOOG makes up part of our own FSI and managed to push that index up 13% with a little help from the other three components, AAPL, AMZN, and RIMM, all up on the day. Even with this big move the FSI is still down 17% on the year. The NDX, NASDAQ 100, got a little help from GOOG and its friends and managed a 3%+ up move, too.
In the news, we still hear a lot about the way the government is getting involved with the "mortgage crisis". Not that we think this is old news, we think it is the real story but the market is currently thinking that something is being done about it, even if it has to be the government doing it. Our concern is that the government is getting the taxpayers involved and that will eventually become the market's concern. That is an issue for another day. The other part of our concern is that the Fed has tried to do too much and will become a ward of the government, too, before this is all over.
So, how there can actually be bulls out there is beyond our comprehension but the market is moving up on the latest money being generated by the powers that be, namely the Fed in this instance. We have mentioned on several occasions that the Fed doesn't have enough money to handle the current problem which is one reason the government has felt compelled to get involved. For now, though, the world perceives that the Fed's injections are good enough. Well, they are being put to good use (yes, sarcasm) by pushing stock prices up.
We are quite convinced that the latest up move we are seeing is only a short term party. The real market will be growling soon enough. For now, we are glad to have stepped aside to allow the bull to pass harmlessly through our cape. We have no intention of killing the bullish move because it isn't a real bull...ok, this analogy is getting old.
FSI: 87.76 (big move on the back of GOOG's 20% day)