25%ish
Dan Greenhaus is at the Equity Strategy Group at Miller Tabak + Co. where he covers markets and portfolio theory. He has contributed several chapters to Investing From the Top Down: A Macro Approach to Capital Markets (by Anthony Crescenzi).
This is his most recent commentary:
~~~
>
As we pullback a bit from the intraday high, the attached chart shows the rallies the market has undergone during this bear market. At an intraday high of 832.27 or so, the market had rallied 24.79% or so from its intraday low of 667ish. While we have pulled back from that high, it is worth noting that such a rally would make this the strongest rally of the entire bear market, surpassing the 24.225 rally we saw off the November low.
To repeat, we have seen previous bear markets end with rallies of unusual strength (relatively speaking). While this may or may not end up being the strongest rally of the current bear, it doesn’t change the fact that the rallies are getting stronger and while we can still move lower from here, Im beginning to believe that the bulk of the declines is behind us….for now. I still believe we will have a double dip recession but for now but in the meantime, a retest and hold of the lows will be encouraging.
Disclaimer: There was a retest and hold of the November lows in mid January that amounted to absolutely nothing other than the decline off of which we just bounced.
>
Dan Greenhaus
Equity Strategy Group
Miller Tabak + Co
March 26th, 2009 at 3:38 pm
could the latest low of 667 be considered a retest of november lows?
March 26th, 2009 at 3:46 pm
Was the V in November and the broader V in February and March the signature of hedge fund redemption selling? While a 25% rally sounds big, we are still not back up to January levels in the S&P. We know the upcoming earning season will produce terrible numbers and no good guidance for the rest of year, however, the market could still bounce in hopes that these are the worst of the numbers from this recession.
March 26th, 2009 at 3:59 pm
@ anonimous:
My interpretation is that a successful re-test recently would not have undercut the November low. It DID, by a significant margin. The past few week’s bounce has merely taken the market from wildly oversold to less oversold, to overbought at this point in time. The volume to the upside has been lightening as the indices have climbed. I think we need non-propaganda driven positive news to make a real bottom. Also, news has to start to be getting good, not just merely being “not terrible.”
HCF
March 26th, 2009 at 4:15 pm
We are seeing cycles of US$ weakening (reflation) and strengthening (deflation) that will continue, along with high volatility, until the end of this bear market. Those who watch only equities are missing The Big Picture.
March 26th, 2009 at 6:31 pm
All I see is lower lows and lower highs. The bear market is not over until we see the 200 DMA breached on the upside by 3-5%.
March 26th, 2009 at 8:10 pm
I’m a bit torn on this but am starting to think the leftback low of 666 may just hold up. I still think we’ll get a few more significant pullbacks and false starts along the way, and definitely one particularly vicious one (maybe two) but we may not go below those prior lows. I do think we have may have a few more “surprises” in store that could change that outlook drastically (e.g. commercial RE and credit card blow-ups, unemployment intensifying, etc.) and that a double dip recession is not out of the question here. Anecdotally here in Minny I am seeing “animal spirits” start to rev up for those who have jobs/incomes, so if that’s right, I see a little burst coming this summer/fall and maybe a dip back into the doldrums in ‘10. I have sneaking suspicion that there are still many chapters to this mess to be played out, many of which will throw a lot of us of course. I hope I am not one of them.
March 26th, 2009 at 8:38 pm
This has a long way to go to fully play out. MW has got the gist of this. There are the “late to the party” home mortgage agreements that will play out over the next couple of years – eg. option ARM’s. Have you noticed all of the strip centers that have been built in your town? These will mostly default and, I assume, were securitized. Commercial real estate. Layoffs. Rally notwithstanding – printing money notwithstanding, the depression has some time to run.
March 26th, 2009 at 8:41 pm
Yeah, I’m starting to believe in the “Leftback low” myself, although I still think it’s highly likely that the SPX will make at least one more visit to the 675 level.
While many have argued that “quantitative easing” by the Fed is not going to push up the stock market, I would disagree, in the sense that I think the Fed can, IN NOMINAL TERMS, raise the level at which the ultimate low occurs.
So I think that at some point in the not-to-distant future we’ll make the transition from deflation to inflation, but pass through a period of price stability, and during that time, the market could rally 50% in total.
March 26th, 2009 at 8:44 pm
Agree DL. The stock market will inflate accordingly. Just when that point in time occurs is the big question. But, still in “nominal” terms. You don’t want to get behind, but, it would be best to get ahead.
March 26th, 2009 at 8:52 pm
@Wes Schott: Driving around the Twin Cities, I’m alarmed by just how many enormous commercial real estate projects are just being completed now when there’s already a glut of space everywhere (for lease signs everywhere).
March 26th, 2009 at 9:41 pm
MW, In H-town it is strip centers. They built the big stuff just before the oil price blow off in 1985. We had undeveloped subdivisions stagnant for 10+ years. Surprisingly, they are still starting new, significantly large, housing developments right now. I guess low interest rate loans and running the printing presses means that those who are in early and out first can take the money and run.
March 26th, 2009 at 11:19 pm
In recent history that we can all remember– the 2000-20003 decline had no fewer than four–4– 24%+ rallies on the way down to the eventual bottom. Did I say 4?
We saw at that time what we thought was “historic” government intervention-remember??? Fed down to 1%. Airlines were bailed out. Didn’t help speed up the process–still took 3 years top to bottom… So, massive intervention–hmmm.
What I am hearing—not a story of lending coming from the banks. I am hearing story after story of credit line reductions/removals on business lines and personal lines. Not just on marginal businesses or people either, but people that would shock you and businesses that are not small… So what will government stimulus mean if other entities are contracting? I personally am in agreement with the credit contraction, but I am just pointing out it runs contrary to the Federal govt goal of reintroducing expansion. Add in state and local increases in taxes and the whole stimulus might be completely neutralized.
Technically, the charts are too close to call. They are constructive, but at resistance. They need to pull back. How they pull back, and where they pull back too will determine whether they remain constructive. I believe they will fail with extreme prejudice. But that is a gut feel. The charts do NOT say that on the short and intermediate charts. The charts say 850-870 is tough to chew through and breaking 750 would be really bad. That is all it says to me. But, this week has had less than impressive volume and the moves in the market seem to point to an artificial pumping up of the numbers for end of quarter metrics… THAT never happens… lmao Markets moving up on weaker volume can indicate exhaustion. Rallies are born of volume and die from lack of it… caveat emptor.
I dubbed the December rally the Obama hope rally. I dub this one the “Geitner hope rally”. Sad really. The guy doesn’t complete his homework on time the first go round and the market got creamed. Now he’s plagerized a plan that Paulson scrapped and the market cheers. The shadow banking system is dead, so he’s cobbling together a synthetic one… Curing leverage by encouraging 12:1 leverage…great. Cure that hangover with some hair of the dog… We have seen economic figures being mis-represented to pump this rally (home sales, unusual seasonal adjustments…)
I think it goes up or struggles to maintain until around tax week. By then, the hangover will kick in. Maybe we bottom late third quarter or four, but it isn’t until then that some of the compares will get easier for the numbers. The earnings season will speak the truth and the message will be sobering.
March 27th, 2009 at 12:41 am
It is 25% moves like this that has me constantly searching to be in the market at all times while at the same time keeping myself safe from the downside. A 25% move is not something I want to leave on the table
March 30th, 2009 at 10:55 pm
JasRas, Mannwich, WesSchott, thanks for introducing some of the fundamentals of Main Street into the astrological discussion on charts. As a study of herd ‘socio-psychology’, yeah resistance and tops & bottoms are all fascinating. But the fundamentals will likely overwhelm the psycho-emotional astrology in due time.