As things go, yesterday was a real a stunner. Not only did the DOW gain over $276 points today, it retraced 42% of it's losses in just 2 days. I guess climbing the wall of worry is no longer in vogue. You can say, as I heard the news mention tonight, that investors piled on to snap up some bargains from a beaten down market, but I have some problem with that scenario especially if you consider the more recent bad news.
The DOW took 10 days to lose 980 points; granted one day was over 300 points, but that is more likely of a down day than an up day. Yet in recent months, time and again, we have witnessed run ups as frequently if not more so, even some last hour 200 point rallies. That type of pattern were unheard of since the dot com days. Consider also that this rally comes the day before some important economic reports: the jobless rate, both ongoing and new, crude inventories, consumer credit and on Friday the wholesale inventories; not to mention we are just beginning the second quarter earnings reports. Normally I would expect a much more cautious rally considering those. So, what exactly is going on?
The exact answer we may never know, but either the whole world population, sans me, knows that all those figures are going to be great, therefore they are truly collecting to reap the gains coming in the next few weeks, or maybe they know, that "debt is a sign of wealth", like Calif. Congressman Pete Stark recently lectured, and of course as President Obama is currently lecturing about how well our recovery is progressing on his Summer of Recovery tour. Then again, maybe the Kool Aid is more delicious than usual.
Pardon me for being such a killjoy cynic, but I just don't see what changed between last week and this to give us such a great rally. I know about the coiling, you can feel that in a day, for a day and yes, there needs to be a relief of the pressures in the market, but the way the rally progressed today, also suggested something much bigger, greater, like maybe all our debts will be forgiven, or Calif. solved all it's problems and it won't sink the sea, or some such fabulous news. But I cannot find one on the headlines and if no one can point one out to me, then I shall remain skeptical, and I will remain forever humble for not knowing as much as the rest of the world; but then, I am one of those who keeps coming up with 4 when I add 2+2. Oh, well, I guess I 'll have to keep living in Never Never Land.
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