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Wednesday, May 27, 2009

Bull fights back again

The range the US stock market is trading in is very volatile. Tuesday brought an incredibly strong rally to the markets. As I said in my previous post, I expected games, and I got it, worse than I expected.

If the market trades above 930 on the S&P 500, I'll start to panic, and above 950, I'll probably start covering my shorts at a loss at that time. I still believe this market is about to head down hard, but the market can trade irrationally longer than your bank account can afford.

The "good news" today is people are more optimistic about jobs, even though reality paints a much different picture. That was enough to give an excuse to rally up hard. The 200 DMA is still a magnet, and by Friday the recent S&P 500 of 925-930 will touch the 200 DMA.

I still would not add to any shorts or lottery tickets until we break below S & P 500 875. Above S & P 500 950, its time to consider throwing in the towel trying to time this market break downwards.

However all is not well in the market, the US Treasury yields continue to rise, and if unchecked, the rising interest rates will choke corporate earnings and cripple the housing market further. Interest rates are already fast approaching pre-market crash levels. As interest rates rise bankruptcies will increase, as well as government spending cuts.

So once again, Ben Bernanke's thesis that the great depression could have been avoided back in the 1930's by aggressive Fed action is being challenged by reality. Ben, there is no such thing as a free bailout, and you will have to choose: Tank the market to create fear to lower interest rates or have higher interest rates that cripples the housing market and kills any remaining corporate profits.

This bullet cannot be avoided, one way or the other, America must pay for its 9 year spending spree.

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

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