Thursday, December 17, 2009

Financial Stocks Deteriorating

I recently warned that market watchers should watch JPM. It, BofA, and of course Citigroup have begun to roll over (Citi of course has indeed rolled over). (To a lesser degree, so has SPY.) This is dangerous in the setting of very wide spreads, which helped goose the stocks in their mammoth rallies this winter-summer. In the same manner, Markit's CMBX index has begun to break down.

A curent, thorough and relatively calm review of the bear case for stocks and the economy is found at the site of Comstock Funds (short-sellers) in Why We Remain Bearish.

The intermediate and long-term gold charts show more underlying strength. Bloodied bulls who fundamentally "believe" in gold as the one monetary asset not based on debt can console themselves with the knowledge that typically long-term bull markets have relatively slow and relatively steady uptrends (excluding blastoff phases when beginning) and short, sharp sell-offs. Stocks are tired and steadily losing momentum, having rallied to resistance; gold is undergoing profit-taking and aggressive short-selling.

Nothing, of course, "has to be", and the current times are without precedent, as may be the amount of market manipulation. So investors and traders are both advised to be more humble than usual.

Also relevant is the advice:

Illegitimi non carborundum.

Copyright (C) Long Lake LLC 2009

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