Welcome Back!

Welcome back! Holidays sure end fast, huh? Hope you guys had an enjoyable Thanksgiving holiday and for those of you still on holiday, LUCKY CHAPS! :)

Those of you back with me today might be tempted to start going long on equities today thinking that the market has rebounded. Well, I am here to tell you... No. Last week's Thanksgiving rally is a simple technical rebound due to a deeply oversold bear market. In fact, futures are already pointing downwards, anticipating a lower open to stocks in a few hour's time. Indeed, I would expect the Dow to continue its way down starting Monday as it is now way off being short term oversold and once again at the top of its declining channel line, which is where it turned down from during last month's technical rebound. The only uncertainty to the sustainability of this primary bear trend is the fact that bond prices have rose and yields have fallen to levels which we have not seen even in the last crisis (see bond yield curve). In fact, it would be fair to say that the returns on bonds are now so minimal that some bond traders should at least be tempted to switch back to equities soon. If an exodus from bonds back into equities happen, it could give some upwards pressure to this bear market.

This week is the heavyweight ISM and Jobs report week again (see economic calendar). Could unemployment rate start to point to a recovery yet? My take is no. I expect unemployment rate to continue making new highs which could start another round of buying from investors expecting a market bottom to coincide with a peak in unemployment rate. That is also the view that I hold except that I am not sure where that "peak" in unemployment rate might be.