Blogs & Comment

The rally that broke the bear’s back?

Markets rallied vigorously on Thursday, Nov. 13,for no other reason than they were testing their lows of Oct. 10. There is a belief among many traders and technical analysts that bear market bottoms retest their lows before beginning a sustained rally, and this belief was what largely caused the major indexes in North America to rebound about 10% from their intraday low just after lunch even as U.S. jobless claims came in higher than expected and Wal Mart downgraded its outlook earlier in the day.
Willthe upturn hold? There is, no doubt, still a lot of bad news in the pipeline. It could arrive as soon as the morning after the “spectacular rally,”with the release of U.S. retail figures. But if a true bottom is in place, at least for the intermediate term as many technical analysts argue, the market will ignorebad tidings and continue to climb. The G-20 meeting on the weekend may also lend support early next week.
The pessimists point to still high interest-rate spreads in the debt markets. And Libor rates are still elevated, and, in fact, have recently reversed their steady decline that commenced mid-October. Credit conditions need to ease more, it issuggested. And Ground Zero, the U.S. housing market, still shows few signs of bottoming out: inventories of houses for sales remain high, as do defaults.