Thursday, March 12, 2009

Is This Rally Here To Stay?

And another big rally today. It seems that this rally has been based off of good news, rather than technicals. A lot of technicians have been saying we are going to get a rally because of technical factors. But to me, this is a rally based off of fundamental changes. And that is why I think this is a legit rally that is here to stay. Not some one day wonder. There was a lot of good news out this week that has really moved the markets.

First off, after the market closed, Citigroup announced that they do not need anymore capital injections. This is excellent news because it shows the banks are beginning to be able to sustain themselves and may finally be turning for the good. This news came out today after the close of the markets, but Citi was up 6% after hours.

Second, Bank of America, Wells Fargo, and JP Morgan Chase all followed after Citigroup and announced that they too were profitable throughout the year. I expect the market to go up in early trading tomorrow as Citi made its announcement that it won't need more capital injections.

Next, GM announced that they did not need the 2 billion dollars the government was ready to give them. This is good news because finally maybe the car industry has cut costs and will be able to start recovering.

Fourth, retail numbers came out today and were better than expected. On top of that, January retail numbers were revised to show that there was actually an increase in retail sales. After all the negative economic news we have been getting, it is nice to see that things COULD finally turn around.

Mortgage rates have been dropping, mortgage applications have been rising, and less and less houses are being built. There is going to be a turn in the housing market soon.

Additionally, GE got its credit rating cut, and the stock skyrocketed. This was the first time that really bad news has been priced into stocks, and when reality came around, the stocks went up. We've been searching for a bottom where the worst of news has been priced in, could this be it?

And finally, Congress is pushing to have the mark to marketing accounting rules revised. This is going to give banks a lot of breathing room.

These changes show that the economy and the market is making fundamental changes to turn around. We are not out of the woods in the economy yet, but we are finally moving in the right direction.

1 comment:

  1. I think this is at most a sucker's rally. The real recovery should begin in the third quarter.