In each of the movies "House of Games" and "Casino Royale", there is reference to a "tell", a familiar term to poker players. A "tell" is a poker player's behavior, perhaps a tic, that reveals to his opponent what he holds. The opponent can "tell" whether or not the player is bluffing.
Money managers are looking for "tells" that reveal what the stock market will do in the future. Counterintuitive stock market behavior is such a "tell". We encountered such behavior yesterday when the market rose in the face of a much worse-than-expected employment report. While this report is subject to many revisions, it is still very important to investors. Yesterday's market action signals that, at least during the short term, the market is very oversold and has an upward bias.
We have been in a recession for a year already. At this point, the recession is deepening and we will suffer through many more worse-than-expected news items. Bear markets, however, end before the news gets better. As mentioned in previous postings, I believe the bear market for most stocks ended on October 10.
Bull markets tend to ignore bad news. Yesterday's counterintuitive behavior is a welcome sign.
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Today (12/08/2008) the market was up 300 points on the comments of Barak O. How long will it be until his program gets passed in congress (and what will it look like when it is passed)? How much more bad news will appear before then? And how long will it take for a package to make a difference (if it will make a difference)?
I see the rally as a bear trap and we will be seeing some more lows.
One bright note: The price of gasoline! I estimate that the difference in today's gas vs earlier cost may in itself stimulate the economy. I think it may be (on average) as much as or more than $1,000/family, and that's tax free savings.
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