Is this a false rally & will there be a huge drop?

Hard to tell.

There are loads of people who strongly WANT to make stocks work and therefore are drooling over the low prices for substantial companies. With every glimmer of hope, they dump another dollop of cash into something.

Yet the economy is globally suffering. The value of the US dollar is being held up on a hope of a future that somewhat resembles the better days of the not-so-distant past when things were good. But the US government is changing the rules and roles. For example, the president of the US doesn't normally tell the CEO of a major corporation to resign (GM), the president of the US doesn't normally make bankruptcy announcements like it is rumored will happen tomorrow with Chrysler, and major banks don't call the secretary of the treasury and ask if they can pay the contracted bonuses to their biggest managers. The government can tell the top players at AIG to give their bonuses back while also telling Bank of America and a bunch of others who made their bargain with the devil and accepted TARP money that they can't get out of the government hooks by paying the money back. Obviously, some things are substantially changing, so where does it end and what are the effects along the way? We don't know.

I'm guessing that the rally will fly still further on the moments of hope, and fall when they realize that the wind of business reality simply isn't holding that kite up anymore. Sorry.

As for me, I'm playing the turtle right now, positioning my 40-k money into safety and my trading money mostly into cash (although that gold ETF is looking inviting, still even there gold does not have its monetary escape value that it used to).

No it's not false. Whether there will be a huge drop, I'm not psychic.

The extension of the bear market breaking the November low was caused by bank nationalization rumors. When these turned out false the Dow moved back up to 8000. The market then consolidated there in April until 1st quarter earnings. Most Dow stocks except Kraft next Tuesday have announced their reports and the DJIA is climbing higher.

Apparently neither Citi Group or BofA want any more government funding. I find that possible with BofA because they doubled net profit in first quarter earnings so they could progressively offset toxic debt. I don't find it believable with C. Although they last reported a smaller loss, it's still not a profit after 6 quarters. I don't know why investors look at these two like they're the same bank when BofA clearly outperforms Citi.

GM going down is no shock news to the market. It's already factored into GM's price. AIG was replaced with Kraft on the index. The sooner GM gets replaced the better. Meanwhile Ford announced they will at least break even by 2011.

1st quarter earnings reports were overall better than expected and the Dow broke above a 8150 resistance in the last session.

quick answer:

Long term No this is not a false rally, we were undervalued and now the market is trying to right itself to be priced according to current market, global, economic, and individual companies conditions.

Short term: 1-5 months

Yes thes is a false rally in the sense that in order for the market to be "Healthy" we must go down and retest some lows. Is that 825,800,775,700, or 648 on the S&P 500 No one know for sure. What will spark the decline, once again no one knows for sure.

Will it be profit taking 31% up in six weeks is too much too fast to sustain. Will it be more banks being underfunded, in trouble.

Will it be another Large company to fail?

Will it be a Flu?

Will it be GLobal ____________?

In the short term taking some cream off the top, taking profit , increasing cash positions, and be Ready !- Set !- But don't go yet is my motto.

Go away in May.....

Summer pullbacks.....

We can get better deals on stocks in the next 30 to 90 days

My bet is to be fully invested by September 1 and smile all the way until March 2010.

Watch out though, the rally could start as soon as early july.

Mine is an opinion, feeling, gut, with knowledge and education, as back-round data.

"Nothing strongly indicates this recession is over yet players are buying into stocks."

The only way to make money in the stock market is by buying before everyone else buys and selling before everyone else sells.

In the long run, stock prices are moved by fundamentals, but short term, by speculation.

There are some fairly good reasons for thinking we may be at or near the bottom of the recessionary cycle now.

But ultimately, no one really knows. All you can do is make an educated guess. And no one can predict the future. Something may (and will) happen tomorrow that no one predicted that could move the market.

They say the market tries to trade on earnings 6 to 9 months ahead.

That gets us almost in to 2010. Unless there is something to change the current impression that 2010 will be better, I doubt we will fall back to where we were.

The rally won't last through the day...or tomorrow.

It is just not plausible to think it could last longer.

You have a link to (Dow Chemical)...not Dow Jones (DJI).

GM is a component of Dow Jones...so its bankruptcy will definitely have an effect (Probably won't go bankrupt).

WTF did I say...negative DOW & S&P mid-way through the day. Don't doubt 5 years experience and a 1st year MBA. HATERS!

It's definitely a temporary rally. You need to watch some Peter Schiff. He'll knock some sense into you.

=)

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