The first primary bottom shows on the charts in October of last year. After that the market deteriorated slowly toward a second bottom reached in the spring of this year a few percentage points lower. The joy got well spread around and during this phase markets consolidated as everyone checked their corporate health.
Since spring we have recovered back the few percentage points to the original primary bottom established during the initial collapse. At this point information is properly flowing again and corporate numbers are slowly improving. I emphasize the word slow here for the moment. The companies are still working with their banking arrangements to restore their own core liquidity.
This process needs a bit of time and we can also expect to see a lot of corporate debt offerings been peddled as companies replace gaps created in their balance sheets.
So the fear mongering presently been heard is a bit of too little too late. People see a rising market and think there is a building exposure while there is nothing of the sort. This rebound is reflecting a simple recovery of confidence to oversold markets. Not everyone is participating but those with strong balance sheets certainly are.
In the meantime, the US continues to avoid resolving the rolling foreclosure crisis by simply letting it accumulate. It will naturally reach the end of the road and we will have a massive inventory unsalable to those folks who have all lost their borrowing power. It will be long road back and we could well have a lost decade in terms of consumer borrowing. Also the consumer will be naturally cautious for a generation because of these events.
There is enough support out there to have a strong market quarter. It just needs a confidence trigger and we seem to be getting all the negatives expressed and eliminated. In short, it is time to be bullish.