Bull Markets Don’t Rally 300 Points

Wiser heads than ours are still thinking hard about the unrelenting credit troubles, the generally absurd situations of FNM and FRE, and the possibility that this time, socialism for the rich (that broad set of taxpayer-funded free love, free money policies available to large companies and major investors, but not to ordinary people) might not pull us through.  If our bearish data points from yesterday weren’t enough, here are some more:

  • There was a big divergence in the financials versus tech names today, as the attached 2-day chart demonstrates.  While XLF closed down 1%, giving back part of yesterday’s gains, the QQQQ powered a full 1.5% higher.  The most reliable truism all year has been that the markets don’t go much of anywhere without participation from the financials, and we doubt that tech strength will be enough to single-handedly carry indexes higher from here.
  • 300 point Dow rallies are for the bears.  Literally: David Rosenberg says that every 300 point Dow rally has occurred during bear markets.  Intriguing, huh? [Big Picture]
  • If you’re having a bad year, don’t fret.  If you’re having a really bad year, still don’t fret.  You’d have to have a truly atrocious year to do worse than Fortress: their core positions are down 85% over the past 18 months. [WSJ]
  • Not relevant to trading, but here’s a great story about the “demographic inversion” taking place in major U.S. cities.  This is more than just large scale gentrification:

    The people who are moving to the downtowns of American cities today are doing so in part to escape the real or virtual “gated-ness” of suburban life. The condos that house them in the coming years may feature elaborate security systems, but the inhabitants will not be walled off from the street. They want to be in contact with the street. Nor do we have to worry about the return of the idea of warehousing the poor in vertical Corbusian ghettoes. That is one beast we have managed to slay. [The New Republic]

    Who knows? Maybe our grandchildren will avoid ever having to visit a big box retail store.  Maybe not owning a car will become the rule, rather than the exception (Zipcar and taxis get the job done).  Maybe living in a walkable neighborhood will be prized more than a large private yard.

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More


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