Optimism Abounds for Rebound

In anticipating the week ahead, I am struck by how optimistic the business sites are. I think this type of "spin" put forth by the main stream media is a good contrarian indicator. For example, marketwatch.com has already prognosticated that further strength in the market and recovery will continue based on strong data reports and earnings reports from Goldman Sachs (GS) and Texas Instruments (TXN). Those are all asumptions and tying in the earnings report from TI and GS has nothing to do with the state of the equity markets and the economy. It also does not alleviate the fact that we are in a technically broken market where the inflection point has been reached to the down side. The trend has clearly been established to the down side and the meager attempts at recovery last week is being heralded as an evidence by many main stream media that the bottom has been reached and that recovery in the stock market is in full force. I beg to differ. An interesting blog from 1stmillionat33.com, has a nice piece on the fact that most journalists and perma-bulls are ignoring the troubling past market evidence of further deterioration in the market place.

While I am sticking my neck out on the line, I do not think the health of the economy and for that matter, the global equity markets are not healthy with many emerging markets including China overheating into bubble territory. I do not know what the catalyst will be to pop that bubble but I imagine we are closer to that event that we are far away from it. The fall out from the sub-prime mortgage industry is far reaching and those who are spinning it as a localized problem without contagion are dead wrong. While I am a bull in many instances, I have also lived through the horrific dot com melt down and not one analyst, economist, or market gurus were right in calling the down market. The exact feduciary duty that they held for the millions of investors that relied on them for guidance. Now is no different.

My game plan is continue to short the market on any evidence of temporary market strength. I do not know how long this "dead cat bounce" will continue. My mantra of "sell the strength and buy the weakness" still holds. For most, this is a high risk market environment. If you have gains, I advise on taking them and go to cash and see where this see saw battle ends. I am not claiming to be right because I have been wrong more times than I can explain. I can only offer my opinion, and that is all it is. But every once in a while, the market screams so loudly that what it seems is not what it is, that I have to speak out. We are due for a major pain which will surpass all that we have experience last couple of weeks. We are not yet done folks. This is how many down turns in economy and disasters in the market place starts. The "experts" will continually say that the economy is fine and that they would advocate buying the weakness as "the stocks are on SALE". Belive it if you must. But I choose to ignore these pundits and formulate my own opinion and heed the loud cry of warning. I guess I have now become a bear. That is too bad because I like being a bull. But these are not those times.

Please throw caution to the wind and not believe all that is said in the media. They are as confused as you and I are, perhaps more due to their predisposition to spin things. Good luck this week and as always be careful!