Man, am I ever confused. I can't understand how we're supposedly having this rip-roaring recovery, and yet the sectors that are notably absent from the market rally are the energies. How in the world can we be having a recovery with the energies lagging? I thought that the energies would be the very first to signal turnaround. Perhaps energy prices just became too dependent on hedge funds?
In a great many places, we've been bouncing for six months now. It's as if stocks are pricing in a return to "the way we were". I just don't get it. We can never return to "the way we were", can we? Aggregate demand was largely dependent upon borrowed money, money that isn't being lent now. Sure Q1 bounced - we had pent-up activity from Q408. But conditions for the consumer are only recently deteriorating.
Up until now, I thought it was largely short-covering - the stocks bouncing the hardest were those down the most and shorted the most. But as I peruse more and more short interest data, it really doesn't appear that there is much net short covering taking place. I think we're nearing the time to be short - insider sales are off the chart, CNBC is ravidly bullish, put-call is at multi-year lows (and has been falling for six months now), distribution is evident in lots of places, and the seasonality is about to turn negative, but the technical activity isn't panning out. Choppy, terminal moves aren't terminating, but continuing to extend. The market just grinds higher. Trash that has quadrupled continues to soar. Companies that rushed to slash costs are reporting profits that are sometimes all-time records. Can this really be true in the face of a generational credit crunch? If it's real, why isn't it showing up in the energies? Is it just that energy was the only sector without short interest?
Maybe I need a break...
BC |
