The Stock Market May be Climbing Again,
But it’s Not “Business As Usual”
But it’s Not “Business As Usual”
By Andrew Packer
Last week’s rational move in the markets – what was shaping up to be a correction – now seems like the distant past. But now isn’t the time for short memories…
As markets move up on expectations of earnings season, we should consider whether or not reality is really being accurately priced in.
Unemployment is still on the rise after breaking a 26-year high. While the data suggests that the rate of this rise may be declining, the data continues to be adjusted upwards—when nobody’s looking.
Government measures of unemployment, which chronically understate people who have given up on searching for work, are nearing 10%. The government’s official number of unemployed people exceeds the number of unemployed at the peak of the Great Depression.
Another interesting area is in volatility—it’s recently started to inch back up, then dropped back down when markets resumed their upward trend earlier this week.
Volatility Implies More Greed than Fear in Markets Right Now
The last piece of the puzzle I’m looking at is volume. It’s still declining…
A healthy bull market would have increasing, not decreasing, volume. In the past month alone, volume in Citigroup, the poster child for how fraudulent this rally is, has been cut in half…
Citi Volume Collapses: Market May be Next
As you probably recall from previous A-Letters, Citigroup has been trading at unprecedented volumes for the past few months. Indeed, for most of the rally, they’ve averaged hundreds of millions of shares – if not billions – traded each and every day.
But even that curious trend seems to be slowing down.
Indeed, the “Dr. Seuss” elements of this rally – the surrealistic quantitative easing, the back-room “toxic” deals, and the volume of trading going on at bailed-out firms like Citi – those dynamics are gradually starting to unwind as central banks pull back the liquidity, and as people begin to realize that they’re not really any better off than they were a year ago. They’ve talked the “recovery” talk, now they have to walk the recovery walk.
And as you can see from the VIX above, the market doesn’t seem to be making provisions for how that withdrawal might turn out.
Call me a skeptic, but at the moment, there are more reasons to be cautious on the long side than exuberant.
Stay Sovereign,
Andrew Packer,
Credit Crunch Short Report Editor
Source: Sovereign Society