A couple weeks ago I mentioned some empirical data that I was seeing in industries that I follow in my private equity job. As a result, I bought a hedge in the Proshares Ultra QQQ (QID).
The recent retail sales drop of 0.6% in February is the first market indication of this weakness. Unfortunately, I think there is more bad news to come in the short term. I would expect the durable companies and home improvement companies to pre-announce bad earnings for the first quarter. Both January and February have been very soft in consumer spending, especially for big ticket items.
The credit crisis has spilled over into home equity loans and I am hearing that is very difficult for consumers to get any kind of consumer finance right now.
While Monday's stock climb was nice, I do not see the short and medium term in the market to be very strong. I am hopeful that sometime after the first quarter, things will begin to recover and we can start a new bull leg up, but unfortunately I don't think that Monday was the start of that bull leg -- just another dead cat bounce.