The Best 5 Days in 75 Years

I emailed a buddy of mine last Friday and wrote something like – “You know the boys will pull out all the stops to get the markets to rally soon. You can’t have all the shoppers wanting to slit their wrists going into Black Friday (The biggest shopping day of the year).”

So the powers that be did their job. There were big gap up opens, huge last hour rallies, the bailout of Citibank ($326 billion) and the government promising to finance $800 billion of credit card, automobile and mortgage debt. I think the NASDAQ rallies 2% in the last 15 minutes on Friday. Did I mention that we rallied into month-end again?

Same old games.

Who are the guys who actually buy these rallies? Every other Fed-induced rally has ended in a crash. Do you think this one will be any different?

Let’s take a look
I went through several thousand charts over the last few days. I wanted to see how indexes were trading relative to prior crashes. I wanted to see which sectors were acting well. I wanted to see which stocks were holding up to be potential leadership for the next Bull Market. I wanted to see how bonds and interest are trading and how well commodities are doing in the face of all this new money creation by the Fed and the Central Banks of Europe and Asia.

Markets
I have never before seen a time where every, and I mean every, domestic stock index and international stock index all crashed in unison. It’s extraordinary!

S&P 500
All I see is a spike rally on diminishing volume into massive resistance (900). Look at how the last spike up rally failed in early November. I could rally up to the 50-day (Black Line), but the 50-day has been sold hard since this Bear Market started.

It will all come down to what does big money want to do next week. If they show up selling, then we get yet another leg down. If they show up and buy on volume, the 960 is real possibility.

The charts of all the US Indexes look exactly the same. The rally felt great and no doubt bailed a bunch of investors out for the time being. But it feels like a classic Bear Market Rally – made you feel good, make you nervous about not being in, suck you in and then roll over. We’ll see how it plays out, but I have started to build short positions.

Sectors
There are 192 different sectors of the economy, as measured by Standard & Poors. I look at the charts of each sector this weekend, because at some point this Bear Market will end and I want to see if any leadership is showing up yet.

Potential Bottoms
I saw 1 potential bottom – Airlines
I looked at the charts of the companies in the sector and they look horrible. I see lots of bounces into moving averages and lots of companies being outright crushed (Southwest was the worst).
So I’ll pass on airlines for the time being.

Commodities
Still look horrible.

Currencies
Are still avoiding risk.

So, outside of a 5-day moon shot, nothing has changed. I sound like a broken record. I am starting to get short again for the inevitable retest of the recent lows, or worse…

If (when) things charge, I will too. But for now, I need a lot more evidence to convince me that I can risk my money again.