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From: Rarebird	5/28/2010 9:43:10 AM
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Transcendental Market Truths: The Market: The Chinese banker who said they were going to reduce their holdings of euro securities may not be around anymore. In any case, the news which cratered stocks on Wednesday reversed course and sent the market flying on Thursday. Such is the degree of control coming out of China these days. This may be making it look like China is capable of saving the world to some casual observers, but the truth is that China is falling into a trap from which it is highly unlikely to extricate itself. No, China is not going to be the engine which pulls the world out of depression. It's far more likely that China is the lead weight which drags the world deeper and deeper into the depths. The Obama stimulus was far too little and was directed to rewarding campaign contributors, rather than creating new jobs. That's why the economy is falling back into recessionary conditions and jobless claims are rising. The government probably could have done a lot more with the stimulus that they did enact (although I still contend they needed a lot more stimulus to fight its way out of this depression). But, it didn't happen and the market is not getting any real job growth out of the massive debt run up to support that stimulus. The ECRI Leading Index, which forecast the rebound I saw last year, has been plummeting at its greatest rate of decline in decades. Is this a forecast of another leg down? Without doubt it is. I'm looking at the week of June 6th to bring a much more substantial beginning of a rally in stocks - and that timeframe could very well correspond to a much lower basing price area for the market. Money flow has remained relatively strong on the rebound off the last low. This tells me that while the market has been moving hand-in-glove with the euro, the stock market is under some net accumulation while the euro remains under distribution. In other words, it doesn't take much of an excuse to rally stocks when the euro simply shows a bit of strength. I think it is it more likely that the current rally this week will falter and lead to a lower low into the second week of June (June 6th-9th). The rally off the June low would be the last gasp of the stimulus-induced "sugar high" rally in the market and in the economy before the next leg down in the secular bear begins in earnest in August.

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