End of bear market is within sight

Market forces June 3,

The stock market bottom is within sight
Last November and earlier this year we were bullish and believed President Obama would enjoy popularity and a stock market rally. Clearly he had glad-handlers who wanted a rally but he expressed such a deep tyrannical and confiscator socialist ideology that Obama was effectively causing an economic depression rather than a rally. So we gave up on Obama and his dictatorial control over the three branches of our government. He even dictated who will be the president and the directors of some American corporations; even some he has not nationalized yet.

So in January we said take profits and cherry pick out. That buy and profit taking was pretty much a neutral wash at first. We got a buy signal near the next market low but it did not appeared as though it would be confirmed so we said hold off buying and continue cherry picking out. Therefore anyone who cherry picked in late November and continued to take profits through May should have made a handy profit from that call even though there was no Obama rally.

At the current market high the S&P was close to, and the other American indices exceeded their January highs. That is something one would expect for a bull market but the last market low should not have been so low… it should have been no worse than the previous low for a bull market to be declared.

So there is still a risk that the next decline could wipe out all the recent gains and more. For instance some people prematurely declared the Dot-Com bottom in October of 2002 but the real bottom was in March of 2003 when that bottom was tested. We have been saying for quite some time that we believe the bottom will be in place before fall and likely by the end of August.


Stock market blowhards:
Barron's examined the track record of blowhard Jim Kim Jong-il Cramer. Barron's says that from May to December of 2008, following Cramer's recommendations would have cost you a 35% loss compared to the 30% loss the market saw during the same period.

Cramer's sell recommendations outperform the market by as much as five percentage points, but Barron's reports that his buy recommendations on average lost 10 percentage points more than the market.

"Cramer is wildly inconsistent, and the performance of individual picks varies widely," Barron's reports. "So widely, in fact, that it is impossible to know with confidence that any sample of Cramer's recommendations will enable you to outperform the market." We find that Jim Kim Jong-il Cramer is so erratic he is dangerous to our well being.



Market Outlook

Yesterday volume fell further below its moving average indicating the sense of market vulnerability. MSNBC/Pravda has indicated that the weak stocks were rightfully the market leaders because they are such losers that they have the highest risk and therefore the highest probability of gain. Of course MSNBC/GE/Pravda is known for such foolish reasoning. High-risk stocks do not create high gains, but high gains usually are accompanied by high risk. So you can see investors are stupid and illogical to think that buying high-risk stocks like GM would offer the highest gains. But that is what MSNBC/GE/Pravda has said was happening in recent weeks and they too were out on the limb recommending junk stocks.

Last night Asian markets were higher. China’s was up 2% Hong Kong up 1.8%, India down 0.1%, and Japan up 0.4 %.

European markets are down sharply today in the range of -0.7% to -2% mid way through their day. Europe is beginning to feel the effects of the recession and is worrying that the central banks are creating a more dangerous bubble by inflating the money supply.

US futures indicate the markets will be under pressure today. A sell-off of up to 15% is becoming more probable now.