Thursday, November 5, 2009

Will It Last?

Back to writing again after going to Vegas and getting back into the swing of things....The market action today resembled what we saw so often so during the summer rally. Once we started running, there was no looking back. Volume was mediocre, but breadth very strong. The bears were worried about being squeezed, and the bulls were worried about being underinvested. Apparently, no one was too concerned about buying in front of the jobs data tomorrow, or maybe the shorts figured they better move out of the way.

The pattern of the market for a very long time now has been near breakdowns and then very aggressive recoveries. If you harbored any doubts about this market, you have been continuously surprised.

I think this action today is a celebration over the fact that the Fed is not doing anything to drain liquidity out of the system. Of course the knee-jerk selling that took place following the FOMC announcement on Wednesday was a good way to sucker in some bears before we took off again today.

Despite this very powerful move today, I still question whether we are going to pull off another V-shaped move straight back up. We have had some real changes in character lately, and while the market seems to have problems with short-term memory, I think the buyers may not be quite as euphoric going forward.

The bulls' biggest argument right now is that performance anxiety is going to drive a lot of money mangers to buy "beta" (stocks that move faster than the market averages) in hopes of catching up. I'm not sure that it is that simple.

We'll see what the jobs report brings in the morning. If we miss expectations, it will be very interesting to see if the buyers who missed out today are willing to buy a dip tomorrow. That has been the inclination since March. On the other hand, we have had a lot of "sell the good news" reactions lately, so keep that in mind if the numbers are better than expected.....

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