CHESSNOID

The market was just another day of a roller coaster ride. It was down, up, down, up, down then up and up, then retreat. They all ended up on a positive note, but the news that moved them was not really good news. Short term it is good to hear, but long term they are just band aids to an extreme ailment. The federal reserve announced it will lower rates again. Capital One said it will take more losses. Countrywide was being speculated that it would file bankruptcy like New Century back last April. Then Bank of America looked like it stepped up and said they were considering buying Countrywide out. BofA did bail them out last November by infusing $2 billion dollars in exchange for stocks at the time were priced at $22 a share. That investment was a winner back then before the stock plummeted to $6 a share this year. Countrywide stock went up to about $8 a share. To me it just looks like BofA is trying to hide a bad decision by buying the company out. That 70% cut in share prices would have reduced that $2 billion dollar investment into an embarrassing $600 million. OUCH! $1.4 billion loss in 2 months is a whole lot of cheddar.

Investors interpreted this news as positive, but it seems negative to me. Then after the market closed American Express made an announcement following up Capital One charge offs with their earnings assessments. I don’t know how investors will interpret this, but it is negative news. These are all symptoms of a recession in the making which of course results in higher unemployment and a slower economy. I know the market ended up but I am sitting this market out until everyone is in agreement that we are either in or headed for a recession. After that happens, then I think we might be at the bottom of the business cycle with new trend lines pointing up. On most stocks and indexes in the US markets, the charts show most 50 and 200 day moving averages all point South. I can only wonder if this is a bear market trap.