Rally Met With Usual Skepticism

The first taste of 1400 on the S&P 500 in months was met with selling, as you might expect, but the stock market is on the verge of making the herd look foolish. Nobody believes...

Financials remain despised. Merrill has only 6 buy ratings from the 19 analysts following it, Citigroup 7 out of 17.

"Most of the financials are accurately priced and there is no point in wading in there right now, because I think second quarter will be at least as ugly as [the] first quarter," says Christopher Whalen, managing director of Institutional Risk Analytics. "I think you could see banks consuming so much capital that some of them are going to go down a lot more." TSC

Doug Kass took a shot at Bulls Monday, waving goodbye to the rally, and when that did not produce the desired effect he tried again mid-day Thursday:

The Sunshine Boys were out in full force last night on "Kudlow & Company," and the content of the show continues to be proof positive that too many worship at the altar of price momentum rather than, as they should, at the altar of fundamentals, which, from my perch, are eroding. TSC

To be fair, Kass turned constructive earlier this year, and has the common sense to take the ebbs and flows in stride. But this week has not provided a respite for the bears, as we consolidate recent gains.

Even Merrill Lynch, the object of so much scorn from the SellSide, is in turn negative on the market, warning that the quotes you are seeing are unsustainably high:

“After dropping by almost 20% between October and mid-March, the S&P 500 has recovered almost 40% of the decline in just one month, leading many on Wall Street to believe that the market has bottomed and that the economy will soon follow suit. As economists, we are very concerned that this belief in the turn is extremely premature,” Mr. Rosenberg wrote in a note.

“Bear market retracement rallies of 40% or more are not at all uncommon and can often result in dramatic increased bullishness. What we do know about the early phases of recovery in the bull market is that any good news is met with widespread skepticism. That is clearly not the case today. As such, in our view, it is still way too early in the recession phase and market cycle to reallocate portfolios away from bonds and toward stocks.” MarketBeat

I would rather take stock tips from a chat board than an economist, but that is just me. Of course, if you are looking for historical precedents to help you allocate your assets, just take a look at consumer confidence.

It has not been this poor since 1982. Which, of course, was the year the great bull market of the 1980’s kicked off.

Don’t Bank on a Bottom
TheStreet.com

Kass: Don’t Count on a Second-Half Rebound
TheStreet.com

Premarket: Rotating Right Into the Weekend?
MarketBeat
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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