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Enjoy the rally while it lasts - but expect to take a sucker punch

Bear market rallies can be explosive. Japan had four violent spikes during its Lost Decade (33pc, 55pc, 44pc, and 79pc). Wall Street had seven during the Great Depression, lasting 40 days on average. The spring of 1931 was a corker.

James Montier at Société Générale said that even hard-bitten bears are starting to throw in the towel, suspecting that we really are on the cusp of new boom. That is a tell-tale sign.

"Prolonged suckers' rallies tend to be especially vicious as they force everyone back into the market before cruelly dashing them on the rocks of despair yet again," he said. Genuine bottoms tend to be "quiet affairs", carved slowly in a fog of investor gloom.

Another sign of fakery – apart from the implausible 'V' shape – is the "dash for trash" in this rally. The mostly heavily shorted stocks are up 70pc: the least shorted are up 21pc. Stocks with bad fundamentals in SocGen's model (Anheuser-Busch, Cairn Energy, Ericsson) are up 60pc: the best are up 30pc.

Teun Draaisma, Morgan Stanley's stock guru, expects another shake-out. "We think the bear market rally will end sooner rather than later. None of our signposts of the next bull market has flashed green yet. We're not convinced the banking system has been fully fixed," he said

Mr Draaisma said US housing busts typically last nearly about 42 months. We are just 26 months into this one. The overhang of unsold properties on the US market is still near a record 11 months. He expects the new bull market to kick off later this year – perhaps in October – anticipating real recovery in 2010.

Keep an eye on the upward creep in yields on the 10-year US Treasury, the benchmark price of world credit. This alone threatens to short-circuit the rally. The yield reached 3.3pc last week, up over 1pc since January and above the level in March when the US Federal Reserve first launched its buying blitz to pull rates down. Bond vigilantes are taunting the Bank of England in much the same way, driving the 10-year gilt yield to 3.73pc.

I thought you'd posted this with the thread title.

It looks like the suckers are being taken in, unless of course the economy really is recovering and this was just a storm in a tea cup.

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Enjoy the rally while it lasts - but expect to take a sucker punch

I thought you'd posted this with the thread title.

It looks like the suckers are being taken in, unless of course the economy really is recovering and this was just a storm in a tea cup.

I'm too lazy to have posted this, but it fits. Thanks.

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Enjoy the rally while it lasts - but expect to take a sucker punch

I thought you'd posted this with the thread title.

It looks like the suckers are being taken in, unless of course the economy really is recovering and this was just a storm in a tea cup.

This "rally" was manufacture through manipulation the equity markets themselves and huge international media effort emphasise the good while minimising the bad. This was backed up by key forward indicators that are bullish being manipulated such as the stockpiling of copper in China driving up copper prices and the stockpiling of oil to achieve the same with all. Many people fear this is the start of the commodities hyperinflation event, I do not.

The early part of the rally was through low volume, I understand last week saw record high volume. This is a sign the suckers got sucked in. If I am to stick to my manipulation theory now they have higher volume they will keep rewarding with further rises hoping to maintain high volume, when they have enough people carrying the bag it will turn. The manipulation is not about creating new highs in the markets it is all about managing them down in stages and spreading the pain. This latest rally will certainly spread the pain!

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This "rally" was manufacture through manipulation the equity markets themselves and huge international media effort emphasise the good while minimising the bad. This was backed up by key forward indicators that are bullish being manipulated such as the stockpiling of copper in China driving up copper prices and the stockpiling of oil to achieve the same with all. Many people fear this is the start of the commodities hyperinflation event, I do not.

The early part of the rally was through low volume, I understand last week saw record high volume. This is a sign the suckers got sucked in. If I am to stick to my manipulation theory now they have higher volume they will keep rewarding with further rises hoping to maintain high volume, when they have enough people carrying the bag it will turn. The manipulation is not about creating new highs in the markets it is all about managing them down in stages and spreading the pain. This latest rally will certainly spread the pain!

So it's a Ponzi Sucker rally then?

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Am I missing something - FTSE100 -0.28%. Lots of companies have gone ex-divi as well.

Not that I don't think it's massively overbought, but this hardly registers as a fall!

Not at all: the FTSE is easing back up again now, but before lunch it was looking like a steady slide down was occuring today.

http://newsvote.bbc.co.uk/2/shared/fds/hi/...t/3/default.stm

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For what it's worth I hopped off the S&P gravy train Thursday last week.

(In fact, chucked off the dinner cart for being inappropriately dressed might be a better depiction)

If I was going to form an opinion though, it'd take its cue from gilts; the funny thing about buying stuff is that you need money to do so...

A segue which nicely brings me to my madcap theory for the day; do we suppose that it's any accident that currency and equities have become anti-correlated?

It rather makes one wonder what horror the next balance of payments data (particularly, FDI metrics) will bring...

Edited by ParticleMan
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It's about crunch time soon to see who was right on this rally, Bulls or Bears.

http://ftalphaville.ft.com/blog/2009/05/11...-suckers-rally/

Nothing's really changed in the basics but the Bulls have to move before that

happens anyway, Bears have got their shorts all ready, targetting the biggest

bouncers of the recent trend.

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This "rally" was manufacture through manipulation the equity markets themselves and huge international media effort emphasise the good while minimising the bad. This was backed up by key forward indicators that are bullish being manipulated such as the stockpiling of copper in China driving up copper prices and the stockpiling of oil to achieve the same with all. Many people fear this is the start of the commodities hyperinflation event, I do not.

The early part of the rally was through low volume, I understand last week saw record high volume. This is a sign the suckers got sucked in. If I am to stick to my manipulation theory now they have higher volume they will keep rewarding with further rises hoping to maintain high volume, when they have enough people carrying the bag it will turn. The manipulation is not about creating new highs in the markets it is all about managing them down in stages and spreading the pain. This latest rally will certainly spread the pain!

http://stockcharts.com/h-sc/ui?s=$SPX...id=p67642717293

SPX500 volumes.

Sell off into the low and bounce off the low were both on pretty high volumes it would appear.......

Volume declined into the rally but last week was stronger. Offloading on the back of the stress tests possibly, or perhaps a bit of a blow off intermediate top coming? My money is on that........

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This "rally" was manufacture through manipulation the equity markets themselves and huge international media effort emphasise the good while minimising the bad. This was backed up by key forward indicators that are bullish being manipulated such as the stockpiling of copper in China driving up copper prices and the stockpiling of oil to achieve the same with all. Many people fear this is the start of the commodities hyperinflation event, I do not.

The early part of the rally was through low volume, I understand last week saw record high volume. This is a sign the suckers got sucked in. If I am to stick to my manipulation theory now they have higher volume they will keep rewarding with further rises hoping to maintain high volume, when they have enough people carrying the bag it will turn. The manipulation is not about creating new highs in the markets it is all about managing them down in stages and spreading the pain. This latest rally will certainly spread the pain!

Sounds like what is happening in the housing market, although that has the advantage that many of the buyers are using cash to buy from leveraged sellers, thus allowing the banks to zap the debt, while the buyer takes the hit.

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More a case of is this the turn of the tide.

I've a lot of money directly or indirectly in shares. It does not amuse me to see them lose value. However, I do care to know what is going on.

I too have a lot of money invested in the stock market. Thing is, I don't need to take it back out for at least another couple of years, so while shares are cheap, I'm buying more!

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http://stockcharts.com/h-sc/ui?s=$SPX...id=p67642717293

SPX500 volumes.

Sell off into the low and bounce off the low were both on pretty high volumes it would appear.......

Volume declined into the rally but last week was stronger. Offloading on the back of the stress tests possibly, or perhaps a bit of a blow off intermediate top coming? My money is on that........

Yes, more correct as you point out, the middle section was the weaker patch, and this is where I have been reading about GS trades becoming such a significant part of the market. I think we have reached a point were it will keep teasing the bears and reward the bulls sufficiently to keep them interested to get as many on board as possible. SO it may not fall for a while, then it will have another leg down.

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