Thursday, April 23, 2009

S&P Chart Off Of The March Low

I wanted to give readers a chart-based perspective on this rally since my two week Chart-You-to-Deathapalooza is wrapping up this week.

Much of this move has seemed contrived to many including myself. That we had a rally is surely not really surprising given we have been anticipating one could develop since late last year. While market action seems surprisingly erratic and often unusual, pricing action is purely as expected and technical in tone. ie, I see few signs of manipulation above and beyond the normal activities of traders. One must remember that most activity in the market is purely that of traders or speculators. It is not long-term buyers.

There are some minor signs I might interpret as extreme manipulation. Those include futures-driven pricing action and substantially odd activity on incredible volume in banks. Remember, when Citi hit 99 cents, we withdrew our negative perspective on bank equities for the first time. Our perspective moved to neutral or unbiased. It wasn't that I was or am bullish as I remarked at the time. It is rather a position of external factors - when the largest banks in the U.S. are selling for nickels and dimes, exogenous circumstances would most likely dictate their future.

I would not be surprised if the Fed or Treasury were buying bank stocks when they hit their February lows. When the banking sector is in unparalleled crisis, I would consider it a matter of national security and national interest for the government to possibly intervene. Frankly, other than some people being jammed out of their short positions, it would not have bothered me were the government stepping into the market and buying bank stocks on an emergency basis. That is, as long as it is a one-time or limited event that is eventually released to the public along with a clear explanation of why it was done and what circumstances it might be undertaken in the future. I want transformative change and regulation in the financial industry but I don't want to see a collapse of society as being the driver of it. I don't really think anyone else does either regardless of the fact irrational emotions may often dictate otherwise.

So, does this chart look familiar? The parallel channel marked out a five wave count very similar to the other charts I showed last week. This one is on an intraday chart. The others were on a daily chart spanning months.
posted by TimingLogic at 12:51 PM