Chris Lau - Seeking Alpha

Thursday, March 26, 2009


Top-down macroeconomic analysis.

This is from Castlemoore(an investment house in Toronto):

1) The market has rallied over the past two weeks, but there seems to be missing ingredient essential for the growth of healthy portfolios. For one thing, its occurred on relatively low volumes. This means that the prospects of a healthy banking system aren’t as yet being accepted by the investing community at large.

2) The second point that concerns us is that the market is not rallying on any identifiable event. Rather, it’s being schmoozed higher may a man of great charisma, Mr. Obama, and is based on what should happen given the bank rescue plan being proposed by Mr. Geithner.

Click image to enlarge. Notice the massive volume in Feb/March 2009 when the S&P 500 declined? Now, notice the trading volume decline with each eye-popping rally?

Time will tell if this rally has legs based on no fundamentals backing it. One investment thesis I am developing and acting on is that we are in a bull rally within a secular bear market.

Chart Source -