A Dead Cat Bounce?

Ulli Uncategorized Contact

It was bound to happen sooner or later. No matter how deeply we are entrenched in a bear market, there will be rallies based on short covering and hope that economic improvement lurks around the corner.

That appeared to be the case yesterday, and we’ll have to wait and see if this will be a substantial rebound or just another one day event. It could have very well been a bounce of the 680 support level, since these price points are not exactly chiseled in stone.

On the other side of the spectrum, as I posted in “Looking for support,” overhead resistance lurks at the 741 level for the S&P; 500. Watch that point, if the rally should carry us that high.

Keep in mind that bear market rallies can be deceiving by their power and duration. From the November 20th closing low, we witnessed a 20% rally over 6 weeks, which many mistook for a new bull market. As we marched into 2009, the rally reversed and we’re down again, as measured by the S&P; 500, having lost 20.31% year-to-date.

One of the drivers for today’s rally was Citigroup’s disclosure that they are enjoying their best quarterly performance since 2007. Duh! Since they’ve received some $150 billion in assistance, shouldn’t they be showing some improvement?

I was scanning the news to see if Citi made a more appropriate statement to go along with their above announcement, maybe along the lines of “we’re glad we’re improving and hope that this is just the beginning so that we can start paying back the assistance you tax payers have given us.”

Anything showing a little humility and gratitude would have gone a long way to improve the negative PR; but no, I found nothing and realized that we will never hear those words, as long as the “me-me-me” corporate attitude prevails.

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Comments 6

  1. -Joke-

    No Ulli, it all hinges on the “uptick” rule.

    Once the uptick rule is re-instated we will all be able to breathe easier, the bear market will be over, and consumers will immerse themselves in new-found confidence.

    -Joke over-

    G.H.

  2. So what makes Citi profitable? Not long ago Government converted the preferential shares to common equity so Citi does not have to pay interest on this huge debt. Its a number game. Also, the profits come excluding write offs.

    It seems the so called operational profits came into common use during the last decade. A convenient tool letting you show net profit excluding one time write off every quarter.

  3. I’m afraid to ask this (for fear of being hit over the head!) but, Ulli do you or anybody think it might be a good idea to buy a little Citi just for the trade? If Bernanke has said he won’t let any big banks fail, then maybe this might be quite the opportunity, no? Unless of course new added stimulus would dilute the shares even more. That event wouldn’t happen to late April, right?

    Thanks for any advice,

  5. Ulli: Questio about hedging. When we implement the hedging strategy, do we need to pick up mutual funds which show positive returns in the last 3 monts or 6 months or what? Will appreciate your guidance.

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