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About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, March 12, 2009

Stock Market -- Technical & Psychology

Over the past 3 days, the market has rallied from a deep oversold
up to a modest oversold. Last week, I saw it as a coin toss whether
stocks could rally or fall further to match the kind of oversold %
readings we saw last autumn. Unlike the intermittent rallies we
witnessed through much of 2008, the upsurges this year have all
been cruel sucker moves that have trapped all but the most nimble
of day traders. At the moment, the jury is out on whether this is
just another sucker-doo.

This is the 3rd time this year the market has rallied out of a deep
downtrend line. So, it will be interesting now to see whether the SP
500, which closed today at 751, can advance further, and of greater
importance, can hold above the 710 level through next week's close.
Then, we might have something more interesting.

Market psych. has improved this week because leading banks have
pointed out that net revenues remain at high levels and that cash flows
net of reserves remain substantial. The promise here is that if
the economy is more stable and loan loss reserves are more contained,
the earnings leverage will be quite positive. As well, both the SEC and
the accounting standards board (FASB) are under tremendous
pressure from Congress to modify the ridiculous market-to-market
rules which are making banks take losses they may well not realize.
Both the FASB and SEC are now under strong pressure to respond,
pronto. Congress gets my vote on this one. Finally, it should be
noted that retail sales, a forward but not a leading indicator, are
showing some stabilization (More on this next week when the
co-incident economic indicators are reviewed).

I enjoy trying to gauge market psycology, but the recent change to
positive is a great reminder of just how fast psychology can change
and why you have to be so careful with it.

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