Negative GDP At Last...

The Dow gained 189 points today in a heated battle against the bears even though US GDP turned negative at last. Under normal market conditions (2004 to 2006?) a 189 points rise is certainly a significant bulish day but under the recent volatile market condition, 189 points gains look like a measely sideways day. Indeed, the average daily range over the past 16 trading days have been well above 4%, which is why nobody should be too excited about a 2% gain day. It is clear that investors are totally lost now with bond traders and options traders showing no significant change in sentiments (according to the VIX, Put Call Ratio and Bond Yield Curve).

Investors are clearly worried about the negative GDP number announced today (-0.3%) but are also secretly optimistic that the GDP number will show a recovery in the next quarter (or even during the revisions itself) due to the rate cut and all that's been done so far. In fact, stock markets have historically turned when GDP hits its best and worst levels. The real question is, there is no way anyone can tell when the level is at its best or worst months until it has happened. This means that an entry depending on such data is a little bit of a gamble unless a sensible portfolio building program is adhered to. My take? Brace for at least one more negative GDP number next quarter... not only in the US but in major economies all over the world. In fact, the coming revisions might even take the number lower as disposable income in the US hit an all time low. This thing's not ending without some real recessionary numbers that even academics can agree on.

On the technical front, the Dow seemed to have regained its 8500 support level once again and being in grossly oversold condition, it is certainly not surprising to see a dead cat bounce from this level. So, is this the bottom? Well, I am sorry but I have to say no. I am still expecting that final capitulation that should come with some real recessionary numbers in the months ahead.


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