We’ve joked about the recent rally and how, if you were new to the market, you might think that there was an SEC ban on all selling.  We all know the stats by now.  Stocks have risen in 70%+ of all sessions for over double digit gains over the last 2 months.  Monday’s are almost guaranteed 1% rallies. Volume is always low.  Declines are never more than 0.2%.  But this all pales in comparison to what has happened in the banking sector. The banks have rallied a jaw-dropping 83% of the time during the recent rally.  Out of the 41 previous sessions just 7 of them have been to the downside and just 3 of those were 1% declines.   Over the course of the move the banks have surged 21.5%.  You could certainly call the banks the most hated sector in the entire U.S. economy so it’s only appropriate that the banks surge over the course of the world’s most hated rally….


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. With bond rates marching up, the stock market and commodities rising, does this feel like late 2007 to you TPC? I guess that would imply a topping in the stock market soon with commodities rising through the summer and a pullback in both by the end of the year. I don’t know if anyone can know if a crash is coming but Europe certainly seems to be saying that the rally is on its last legs. Credit markets are not happy and they tend to be smarter than stocks.

  2. This market just doesn’t go down. It’s one of the more amazing things I’ve seen in the last few years. Every single day is like a clock work. And every morning sell-off is bought. It’s almost like guaranteed money. The rules to this market:

    1) Buy every dip. Especially overnight dips.
    2) Buy every Friday close.

  3. most analysts that i have seen who compare the current market conditions to a previous period choose 2004

    the interesting thing about this current rally to me is the absence of significant M&A activity and announced stock buybacks

    these two events should increase as the recovery turns into an expansion, which should give further support for equities

    the financials are outperforming today (not unusual as tpc notes in chart), and if you can believe bloomberg, it is in part because large regional banks have been called as takeover targets by credit suisse. so just a hint of M&A activity is like a match to kindling.

  4. Whether you believe political gridlock is good or bad for market, I do not know. The thing that will be most striking come fall is a populous fervor as both side tries to capture the public attention. If as most pundits predict that Rep gets at least the house back, I expect to see a tightening tone to the Fed as the cries to reign in the deficit will be deafening. Not sure how much of that is priced in the market yet..

  5. I’ll make you a gentleman bet chris. I expect S&P to trade in the 800-850 band by June 2011. That is about 30% down from here along with a LT (1-2 years) top coming in the next month or 2 at about 1250-1270. Since you a bullish and would probably continue to buy dips until proven otherwise, this should be an easy binary bet. Whadda ya say?

  6. Then you can’t truly be as bullish as you posted here. You were just saying a smattering of M&A are coming like kindling. Also how will you know when to go bullish again after the next correction? You could be buying dips and losing chips the whole way down. There are subtle signs that the financial share of GDPs are gonna get chop soon. Good luck on your bullish banking stance.

  7. Chris has flip flopped on his position 3 or 4 times already. Take everything he says with a grain of salt. He acts very bullish on up days and then says he sold yesterday on down days. If the market crashes he’ll say he sold everything last week.

  8. be nice guys, as tpc says

    my focus is on financials, which i am overweight and leveraged. because i am leveraged, i have very tight stops, to prevent the ill effects of leverage. so far so good…in fact, very very good.

    because my focus is on financials, i am very focused on what the fed says and does, whether the treasury yield spread maintains its current historic margin, and how banks will report. i expect good 1Q numbers from banks, which will validate my bullishness into 2Q; if the 1Q reports are not good, then i will reassess.

    so, mike, i would never take a position on where the market will be 14 months out for two reasons: too long term, and who cares about the market when you are focused on a sector as i am. if you want an edge, find a sector that will provide you an edge…the market as a whole is too indefinite…and i would never short a rising market for goodness sakes.

    i would like to know what you guys hold and why; especially you danish…let some of your wisdom shine on us, instead of just your maligning criticism.

  9. I am long emerging markets and small caps. Feel free to criticize at will. I could care less.

    What I don’t understand with incessant fluff is how you can be so bullish, but refuse to be in the market for more than a few days or few percentage points at a time. A few days ago you said you owned no stocks and only options. Now you’re all leveraged up. A few weeks ago you sold when the market was down big and then bought back the next day when the market was up a bunch. It’s a crock of shit.

    Just a few weeks ago you said you don’t short stocks and now you are acting like some sort of short selling expert. You’re a walking contradiction.

  10. danish, i have been all cash for less than 10% of the time since january 09. but i do like to take profits periodically.

    danish, you play iwm for small caps? what about EM, brics or next tier or frontier? it would be nice to have a discussion for once rather than to take potshots at each other.