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.

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.