Market Rallied 5% - 15% In The Past 2 Weeks - Economic Recovery?

Market all over the world is in a buying frenzy in the past 2 weeks or so. Some market rallied as much as 15%. Wow, that's around 1% a day. Something really big are happening.

Wait, what happened in the past 2-3 weeks that got us all into the buying frenzy? does this mean we are out of Recession? Does this mean Economic is recovering? Or better still, Recovered?

Let's analyze...

1. Company financial result.

One of the most important reason market rallied is companies' better than expected financial result for the second quarter of 2009.

What is better than expected financial result? Who is expecting what kind of result?

So few so called "analyst" gave their expectation on a company's financial result and when the actual result exceed it, we buy?

Is that how we decide to buy the share of a company?

So if those "analyst" gave some very ridiculously low expectation and the actual result exceed it by miles, the company is suddenly on the right track again?

This is what happened in the past 2 weeks, some analyst gave some ridiculously low level of expectation and almost certainly below the actual financial result. The actual result are not as good as everybody think, you know.

2. Overall Economy Condition

Overall economy condition look like recovering. In US, some important sectors are improving. Housing sector, Health care, Transportation and banking sector all are improving. Or is it?

Did unemployment rate dropped? Did consumer confidence improving? Did commodities improving along side stock market as well? NO.

Everything is still as bad as before except for few "better that expected" figure in a few sectors. Come on, you don't believe those analyst that told you to buy at Dow 14,000 in 2007, do you?

Today, UK announce their second quarter GDP data and guess what, here's the result:

The Office for National Statistics said GDP fell by 0.8 per cent on the quarter, taking the annual decline to 5.6 per cent. Analysts had forecast a quarterly decline of just 0.3 per cent after a hefty 2.4 per cent drop in the first quarter.

Remember UK is the first developed country to announce their GDP data. What fo you think will happen to the rest of the world?

3. China

Is China the main reason we rallied? No. Is China a reason we rallied, ABSOLUTELY YES!

China Economic Growth accelerates to 7.9%. That a huge boost for China and whole Asia. Or is it?

Remember what happened to the second quarter of 2008 when we all thought economic recovering was on its way and suddenly in third quarter everything became horrible? Will it be happening again? You decide...

4. Fear Index

Volatility Index, known as Fear Index is declining in fast pace signaling Economic Recovering.

here are the chart of VIX for the past 6 months.



I am no expert in Technical Analysis but my brain is telling me a heavy drop like this will result in a heavy bounce and a heavy bounce in VIX will result in slump in stock market.

Anything else? you tell me. For me, one word can summarize the reason market rallied all over the world: SPECULATION. Everyone is speculating the economy will recover and want a piece of it. However in reality, fundamental of economy does not change at all.

After all, if we can solve the biggest slowdown since THE GREAT DEPRESSION with just money and 2 quarters of negative growth, we would not call it the biggest recession since TGD.

So what do we got? YES, SHORTING OPPORTUNITY! Prepare you ammo, ready to shoot it down!