End of the Bear Market? Fat Chance.

Finally, the S&P jumped almost 11% for the week to close at 757, still 52% off the peak in 2007. 

What sparked the bounce?  Something quite flimsy (which is typical of oversold rallies):  the CEO of Citigroup, which still exists only because of the good graces of the U.S. government, announced that, because they’re charging in interest more than they’re paying, they should be profitable in the first quarter of 2009–assuming no write-offs of bad assets.  Wishful thinking.

Other fundamental data continued to disappoint:  Initial claims were sky-high at 654,000 and continuing claims rose to 5.3 million–the most on record (since 1967).  The trade balance shrank, but for bad reasons: trade is collapsing (as opposed to the good reason:  the U.S. exported more goods).  Michigan sentiment remained near record lows.  Although retail sales were better than expected, many analysts warned that massive retail discounts sparked more purchases–this is both unsustainable and harmful to retailer margins. 

Technically, the equity market is showing a classic turn from an oversold level–especially from a daily time horizon.  In fact, even after this week’s snap back rally, there’s plenty of room and momentum to see more upside movement next week or the week after.   But from a weekly and monthly perspective, the market trend is still pointing down.

So is the bear market showing signs of abating?

Amazingly, with the market hitting another bear market low (667) on Monday of last week, there was no shortage of “experts” popping up in the media to spew some version of the same message:  the market, forward looking as it is, is starting to show signs of a turnaround.  More alarmingly, these experts resumed peddling the age old myth of buying and holding, claiming that now is a good time to buy–as if the worst were over.

Is it over?  Considering that jobs are still being lost at record-setting rates, that the housing bust is not slowing at all, that stock market wealth is at 12 year lows, that corporate earnings have imploded and show no signs of bouncing back soon, that consumer and business spending is literally depressed, that state and local governments are slashing spending to avoid defaulting on their bond obligations, that global trade is collapsing at rates that rival those from the 1930’s, and that total U.S. indebtedness, public and private, is still near record highs, the answer is most likely:  fat chance.

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