This market action doesn't make me feel very good. Sure, the tech rally is good. Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) have both made new highs for the year, and are moving my portfolio up a little, but I see problems with the broad market. Despite yesterday's rally, we are much too close to the bottom of the current Dow range - one slip and we are going down. I don't know where most of the traders keep their current stops, probably around Dow 7800. If we break this level, all hell might break loose. I just don't see any conviction in this market.
The fundamentals are awful, but some tech companies are rallying because they have plenty of cash, and they don't need any loans. These days, anybody who needs loans is paying excessively for them. Altria (NYSE:MO) paid 587.5+ basic points over Treasuries for a five-year loan on February 3, and that's one of the best companies in the world! Imagine what auto companies would have to pay! It's no wonder that Ford (NYSE:F) drew down the full amount from its credit lines. The company decided not to wait until those lines were closed under some pretext. The economic situation is simple: It's the Great Depression 2.0.
A barely visible, silver lining that can be found in all of this is that the corporate debt market has started to thaw. There is some movement up in bonds, and if it's not a sucker's rally, maybe, just maybe, things might start improving. Even though treasuries are down a little bit from their incredible high, they are still very high.
I'm waiting for the January inflation data, because if we see more deflation, as I expect we will, then we will be in this cycle for a long time.
Another strange thing that is happening is the movement in commodities - most of them are up. It looks like China is making some planned purchases, and if it's true, then all commodities might go down when China is finished. This could also mean that oil isn't going up any time soon, and might go down even more.
Last but not least, gold is up but India's imports are down sharply, so I wonder who's buying that 30% chunk of production. Maybe we are seeing a discrepancy developing between future markets and real products, again.
Let's wait and see.
Full disclosure: At the time of publication, the author had long positions in AAPL, GOOG and MO and had no positions in other companies mentioned. Positions can change any time.