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Evidence Suggests a Bearish Test of March 2009 Lows

Ok, so the buzz seems to be DOUBLE DIP RECESSION.

  • Housing reports were horrific
  • Biden says its impossoble to restore 8 million jobs lost in the "Great Recession"
  • Payrolls to decline by another 115,000
  • G-20 Governments are going to take the pain now and cut spending, not increase it
  • 10 year Treasury Bond are lowest since 1962
  • Corproate bond distress is increasing
  • Deflation & economic slow down is more realistic than inflation & an overheating economy

Aaron Task of Tech Ticker writes:
"A big concern for many is that the economy is sputtering despite the Fed's historically easy policies and the government's huge spending binge. The idea we've spent all this money with little (or nothing) to show for it has some observers worried America is heading down the same path as Japan, which is about to complete its second-straight "lost decade."

What did the stimulus accomplish?

Alan Abelson with Barrons wrote in an Article he titled 'The Coming Storm.' In that article he writes about a gentleman names Dee Keesler who runs Boston-based SDK Capitol and what his thoughts were on the stimulus spending and what the past rally meant to the overall picture of the market:

perceives the spanking move up from the lows—as do we—as a cyclical rally in a secular bear market. Now he thinks that rally may be topping out in preparation for the return of the beastly bear. And because he's a seasoned global investor, his negative view extends just about everywhere. He's concerned that the massive fiscal and monetary stimulus so liberally applied in 2008-2009 is starting to run out of steam, with financial conditions tightening and leading economic indicators pointing to a stretch of "anemic activity."

So what now for our markets?

It seems that the inevitable is a bearish slide. When that may come is the key. President Obama was not keen on cutting our stumulus like the rest of the world. It appears he would rather keep spending at the present.
If we get some more tax cuts or stimulus, markets may hang on--if not, some believe a double dip is ahead.

The biggest unknown wildcard would be more trouble from the EU. Oor we could have an unrealized slowdown in China's economic growth. Some have called it "stimulus life support" and many governments are now trying to come off it. We are still vulnerable and do not need to be overwhelmed by an otherwise minor event.

In sum, the balance of evidence suggests that we see a test to around March 2009 levels on sheer uncertainty.

Disclosure: No Position