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Central bankers have provided
liquidity with today's announcement; it does nothing to address the real
problems of solvency in Greece, Italy, Spain, etc. (not to mention the
banks). In the last bear market, stocks rallied significantly after similar
announcements (numerous times) only to see 100% of those gains evaporate once
reality set back in. Note the last line in the Bloomberg excerpt below:
"It is about
protecting the liquidity of the European banks," Howard Ward, a money
manager who helps oversee about $436.1 billion for Gamco
Investors Inc. in Rye, New York, wrote in an e-mail. "The private sector
has pulled back from funding these banks. So central banks are stepping in to
make that dollar funding available. Good news is the banks get their dollar
funding. Bad news is that the situation has gotten this dire."
If you review the monthly charts of
the S&P 500 during the last bear market (below) and the current chart of
the Euro Stoxx 50 Index (2nd chart), the answer
appears to be "just getting started." It should be noted that
bearish signals on monthly charts are more important than those on a daily or
weekly chart.
 
Compare points A, B, C, and D in the
chart above to A, B, C, and D in the chart below. It can be expensive in the
longer-term to ignore the facts on these charts.
As a money manager, you are always
nervous relative to the question, "Am I missing something?" To help
answer that question, last night we reviewed all 223 weekly charts for the
most liquid ETFs included in the CCM Asset Allocation Model (AAM).
There is next to nothing on the
weekly charts to suggest the market has found a permanent bottom. Could
stocks continue to rally, even for a few weeks? Sure, but the odds say the
gains will be fully retraced in the coming months. The list below speaks
volumes about the current outlook for the markets from a longer-term
perspective. Our review of the charts was done in such a way as to bend over
backwards looking for bullish signals - they are just not there, nor does it
look like they will evolve from the current rally.
Our objective is to be properly
positioned over the next three months to a year, not the next three days to
three weeks.
Chris Ciovacco
Ciovacco
Capital
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