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Market Recap: There Must Be A Whole Lot Of People Smarter Than I Am

July 29, 2008 9:58 PM

perplexed.jpgWell, there has to be a LOT of people far smarter than I am. I cannot possibly explain why we would rally 266 points today on news that was marginal - at best. I shook my head all day at work as it went higher and higher. Therefore, either I am completely clueless, or this was short covering on financials that got completely out of control. I really do not want to make excuses, so let’s just say I flat out do not get it and apparently people are smarter than I am. If I had a picture of a guy in a dunce hat, I would use that for the post. Perhaps I need to get one.

If we had gapped lower then reversed - I get that move as I thought that was likely and mentioned last night as much. If we had opened flat, sold off and then reversed - I get that move. Today’s action I am completely clueless. We opened marginaly higher and continued the rally to points that defied logic or reason, as I see things anyhow. No reversal low. Ignored all trend lines. No logic, no reason.

Looking deeper into the move, it appears the vast majority of the gains were limited to the banks. XLF was up over 8%. WB up 15%, WFC 9%, WM12%, etc. etc. Looking at the broader market IBM, which probably has the best chart I can find, up 1%, PFE up 1%, AAPL 1.7%, etc. etc. Basically, not much. Any major move you would expect the high beta stock gains to be far more than the market, but that clearly did not happen.

Let’s examine the “news” that supposedly caused this. Consumer confidence improved (but still a very negative number) for the first time in 6 months. Oil dropped again. But the catalyst was Merrill LOST another $5.9 Billion and is seeking more money through asset sales and a stock sale. Hmm, great news, apparently. In addition, an analyst said that he expects C to writedown another $8 Billion. More good news, obviously. Whats another 8-10 billion after the 8-10 billion that was supposed to the bottom, after another 8-10 billion that was supposed to be the bottom. It wasn’t that many years ago that $10 Billion was a lot of money. Apparently now if you only lose $8-10 Billion - you rock. If we can ever get these companies to actually make a nickel, just think what would happen. I would guess a nickel in profit would be a 100% gain in stock, considering only losing $6 billion equates to 15% gains. What total and complete nonsense.

Therefore, apparently there are a LOT of people FAR brighter than I as this makes no sense to me, on any level. American Express just warned not long ago that credit conditions are getting far worse. Rally. JPM previously said that prime loans were getting far worse. Rally.

Anyhow, these nonsensical moves I cannot possibly explain. If someone sees something that I do not, please enlighten me. I was so frustrated with this nonsense rally today that I was going to just not comment anymore on this site until this bear market is over, the shorts cover and get it over with and stop this nonsense, and we can all get down the road. The problem is I have no idea how long that will be. If we have seen the lows, then this could possibly be the shallowest and quickest bear market that I know of. My caution would be this. Anytime anyone ever says in the markets “it is different this time” history strongly suggests to run for the hills. It never has been. Then again, maybe it is - different this time.  And maybe history is wrong this time. And maybe the market is far, far smarter than I am. Or maybe history is correct and these rally’s are total nonsense. Take your pick.

I was just reading Tradestalker’s comments from last night heading into the open today, and his views appear similar to mine. That we “need a strong consumer confidence number or the years lows will likely be seen. Look to be long any weakness - but only on a reversal”, etc. etc. This is what I had “envisioned” for today. I strongly respect his views, although we do have a different take on the market, to some degree.

Today makes me think of a line from Top Gun where Goose says “hey Mav, do you still have that number, Truck Masters I think it was. I may need that”. If these unsupported nonsensical huge moves keep happening, then any “insight” I may have will be completely useless and I may as well make a site on how to raise goldfish or something like that. Not trying to be frustrated with this tonight as nobody can predict the market every single day, but I made this site for the sole purpose of trying to give some insight to the ”average joe” on how I think the market works. Not to provide any advice of any kind, but just to give people something else to look at it to understand “possibly” why things are happening and to question the Talking Heads supposed insight.

If the market continues to make these moves, which I consider completely unwarranted, then the “average Joe” will consider what I have to say as complete hogwash and move on to Cramer or Fast Money or some other nonsense - and that frustrates me as I strongly consider that a big mistake. Therefore, I put pressure on myself to see what is going on, and convey it, if possible. Therefore, even though I do this site for almost nothing, it bothers me if things happen that I do not expect.

Written by Tom@StockBlade.com · Filed Under Pre-Open 

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