Bruce Pile

Why This Rally Is Unsustainable

Doug Kass is building some short positions in anticipation of what he sees as a 5-6% correction per the comment Jim Cramer made on his friday show. But this rally has already had a 5% selloff, at least in the Russell 2000 (April 20) and, like a train running over a possum, you didn't even notice. Why try to trade around it?

The Economy, And Why It's Taking So Long to Fix It

If you accept the premise that the stock market knows all and will turn at least 6 months ahead of the economy, you should be discouraged by this week's action. There were some signs that the S&P broad market would hold the 750 support and head into a bear market rally. But such rallies almost always have a vigorous start up from a support level (see the triple bottom at the 800 level during the '02-'03 series of rallies). This week saw one big up day with no follow through whatsoever, but instead a wilt back down through the support level on very high volume - more volume than the bounce day. Not good. The other major indexes have already breached this support including the transports.

So it looks more likely the market will continue to drift lower. Let's hope it's a drift as opposed to a crash. Inverse investments will probably continue to be the only good area - short ETFs, gold, and now maybe even oil stocks. Both gold and oil typically move inversely to the broad stock market during bear markets. Gold was moving in synch with stocks last year but has since clearly broken free to go up as the market goes down. Oil stocks are still moving closely in synch with stocks, but oil itself may be breaking back into a climb having actually just now broken back above its 50 dma at least briefly. Oil stocks may now be where the gold stocks were back in early December, when you should have been loading the boat with them. But it's too early to make any heavy bets on the oil stocks unless you are bravely trying to nab some very near their absolute bottom.

Fundamentals, Valuations and Technicals Stress Need for Patience

Buy the massacres, sell the recoveries seems to be the only "investment" strategy that is working now. The market doesn't care much about valuation except to add strength to the bounce backs. So the market isn't rewarding very many stocks with persistent climbs. That's probably the way it will be until the market gets some clearer vision on future valuations.

The gold stocks may be the exception to this, but they are due for a massacre themselves.

Great Depression Not Imminent, But Inevitable

America has had many solid preventative safeguards to this debt fiasco presented and brushed aside over the years. The Glass-Steagall Act was put in place after the Depression started separating industry banking and investment banking. And Ross Perot presented the perils of the debt build to America in not one but two presidential elections. What did we do? We voted down Perot twice and put debt builders in office, then they repealed the Glass-Steagall Act in 1999 to make way for the debt wizards of Wall Street.