Would You Buy This Stock Pullback?

Posted Tuesday, May 05, 2009: Is Sell In May And Go Away An Unwise Option This Year?

On CNBC:

• With stocks jumping 35 percent in less than two months, you can't help but ask the question: Is history repeating itself?
  
  Investors who want the stock market to go up had better hope not.
  
  The market's moves after the 1929 market crash serve as a scary template that investors hope the current market won't follow.
  
  At that time, stocks plunged about 48 percent in just two months following the Oct. 29 crash, only to surge 48 percent in the next six months.
  
  But the next two years saw a crushing drop in the Dow Jones industrial average—which at that time was trading off a Sept. 3, 1929 high of 381.17—that saw the index lose 86 percent from the high of the rally.
  
  So could the same thing happen again?

Yes, would history repeat itself again? Here is the rest of the CNBC article: Stock Pullbacks Then and Now: Is History About to Repeat Itself?

Some comments posted on that article.

• "I would say at this point it seems unlikely," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "It doesn't look like any of the really bad things out there that exist as potential worries could blow up in our face and cause us to have a very sharp downturn."
• "I don't expect that to happen because of the stimulus, which is totally different than what happened during the Depression," says Michael Kresh, president of M.D. Kresh Financial Services in Islandia, N.Y. "But right now most of this market gain is on anticipation of things getting better. The only underlying fundamentals we have is things are less worse. That does not a bull market make."
• "That would give a good entry point to see where the buyers live. Straight up is never good. Everybody's chasing performance," says Dave Rovelli, managing director of US equity trading for Canaccord Adams. "I'd like to see a correction of maybe 10 percent of the rally we've had then hopefully some stabilization, maybe get some good economic news
• "I do think we could see another selloff like (the Depression drop) but when it comes I don't know," Kathy Boyle says. "We need to get more exuberant, because there's still enough bears out there. Not everybody's bought in--for the market to sell off that viciously you have to get everybody in. There' still more room on the upside here before you see another fall."
• "One good thing I would say about the rally is it's been very methodical, very measured, slow and steady. That's important because it kind of gives it a more sustainable feel," says Sparks. "As short-term traders we can play this rally and look to expose ourselves to the upside with relatively tight stop-loss even if we still believe it's a bear market."
• "The government's inflating the market right now. They're doing everything in their power to make the banks stronger. It's giving the impression that it's working," Rovelli says. "By the end of the summer if you don't see things turning around in housing and the unemployment rates keeps going higher, you're going to have a snapback to the downside."

The US Government is inflating the market? LOL! Need we say out loud? :p

On another article: Beware the Bear Market Rally

• Market peak -- the Dow hit 381.17 on 9/3/1929
• Market crash -- 10/28-29/1929, the Dow fell 23.6% over the two days going from 301 to 230
• Presumed low -- 11/13/1929, the Dow closed at 198.69, a fall of 47.9% from the September high
• Rally -- the Dow rallies to 294.07 or up 48% by April 17, 1930
• BEAR TRAP -- the Dow proceeds to plummet to 41.22 (yes, you read it correctly) by 7/8/1932, down 86% from the rally high of 1930 and down 89% from its 1929 high
• Recovery -- it took until November 1954 for the Dow to get back to its 1929 highs

Some other articles.

• Dow at 10,300 by End of 2009: Strategist
• Pros Say: A Pullback Won't Kill Rally (Updated)
• Art Cashin: 'We're Severely Overbought' in This Market
• Not a Bull Market — But There's Upside: Citi's Levkovich
• When The News Drops Off
• Whitney's "Rotten Assets" Call

Yes, Meredith had strong words on the financial sector. I Would Not Own Bank Stocks: Meredith Whitney

• "At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."
  
  Whitney, a former analyst at Oppenheimer who has her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.
  
  "This is the great government momentum trade," Whitney said on why bank stocks had seen some improvement lately. "But the underlying core, earnings power of these banks is negligible."
  
  Whitney also said that consumer spending is still going to remain slow. "There's a massive retraction in consumer liquidity," said Whitney. "Credit contraction is happening at an accelerated pace. Consumer spending is going to be less than people expect going forward."

LOL! The great government momentum trade.

Some simply had called it as fake! :p

And some have stated they are simply desireless.

And do note the comments from dear old Kathy on the Japanese Yen. Japanese Yen: Trading At Critical Levels

• The U.S. dollar has sold off significantly against the Japanese Yen over the past 2 trading days. It is nearing a very important support level. If it breaks that level, we could see a test and potential break of 95. Given that equities are pressuring USD/JPY lower, a “break” of the 95 level would be contingent upon a top in equities. In my special report on FX360, I talk about the fundamental reasons behind the sell-off in USD/JPY.

However, George Soros is saying that "The US Dollar Is Already Weak"

• "The economic freefall has been stopped, the collapse of the financial system averted. National economic stimulus programmes are starting to take effect. The downward dynamic is easing," Soros told the newspaper.
  
  "I expect the recovery to make up for around half of the downturn we have had and then to move into stagnation," Soros said. "Asia will be first to find out of the crisis, but America is also currently doing that."
  
  Soros said the U.S. dollar was already weak, adding: "I don't expect the dollar to lose much value against the euro, on the contrary."