With so much money being thrown at the markets, and with conditions deeply oversold, it was just a question of time before we got a snapback rally of great proportion. This certainly qualified and the magnitude of it took most by surprise. Thankfully, whatever short positions we still had left were eliminated shortly after the open. We made money and now are flat.
What next? That’s the big question. Bear market rallies are usually the strongest and today would make a believer of any skeptic.
Government printing presses are running overtime and all this is very inflationary. But that’s always the choice politicians make and authorities succumb to every time. Ultimately gold and commodities should respond but that’s not the name of the game today. It shouldn’t surprise anyone if central banks were selling the precious metal to pay for all this fiat printing.
We still have plenty of problems and not much was changed today except psychology. But that’s always an important component of investing. We still have unsold homes, foreclosures, derivative unwinding, crummy earnings coming and so forth.
Volatility is not removed from markets yet and it’s as likely as not that the markets will retest their recent lows. That’s the way it generally plays out.
Some investors were encouraged to buy like famed but dotcom-failed trader Julian Robertson, who was delighted to announce that decision from the comfort of his digs in New Zealand. It wouldn’t surprise if he was selling his recent buys to you.
So, there will be plenty of table pounding and those calling today the sign of a bottom. Perhaps it is. But the way I see it, we’re just not as oversold as we were coming into today.
I’m content to lay in the weeds for a bit and enjoy the show before joining the crowd whether to reshort or go long.
