morph366

Barron's Calls a Bottom

With dire economic news and further evidence of financial miscalculations on a gargantuan scale becoming almost an hourly experience this is not the time for being heroically prescient. Bear markets end when no-one is paying attention and not when plenty of analysts were making claims that the employment data released on Friday was the turning point - on what basis I failed to comprehend.

The 15 minute chart for SPY shows some late buying on Friday and some are suggesting that having hit the 680 level we are due for a bounce. Others are pointing to the possibility that the hearings in front of a House Financial Services subcomittee this Thursday to review the issue of "mark to market" accounting could also, if the rule is suspended, at least on a temporary basis, provide an excuse for a very sharp rally.

While that is certainly a possibility it does seem that too many people are expecting a violent short squeeze. Should the committee suspend M2M there would be a relief rally but the magnitude may not be as strong as some are hoping for as my sense is that most recently the majority of the selling has not been fuelled by massive short selling but rather a continuation, even acceleration of, long liquidations from pension funds and insurance companies.