Monday, May 11, 2009

Dead Cats & Vicious Bears 2: The Cat Bounces Higher

Back on March 24 I wrote about the dead cat bounce that had been the "stockmarket recovery" up to that time:

Stocks like Fletcher Building [FBU.NZ] are up more than 20% on recent lows, Mainfreight [MFT.NZ] up by nearly 20%, Sky City Entertainment [SKC.NZ], Goodman Fielder [GFF.NZ], Briscoe Group [BGR.NZ], Hallenstein Glasson [HLG.NZ] and Ryman Healthcare [RYM.NZ] all up over 10%. The NZX is up nearly 200 points, 43 of them today. Markets around the world are up dizzying amounts over the last week and a half, the DOW alone leaping around 1000 points off 13 year lows. It gained nearly 500 points today in the third highest ever percentage gain in the indexes history.

Since then the NZX has added another 250 points plus, the DOW is up a further 1000 points to close at over 8500 last Friday and there have been incredible gains on a wide range of stocks listed on the New Zealand bourse, I mean really incredible gains of more than 50% in some cases, all in the space of a mere two months! 

Gee whiz it is like a bull market! (can you feel the sarcasm?)

Retail stocks seem to be among the biggest gainers, as they were the biggest losers when the economy started to fall apart last year

Pumpkin Patch [RYM.NZ] up from 80c to 1.38, Ryman Healthcare [RYM.NZ] up from less than $1.20 to $1.72, Briscoe Group [BGR.NZ] 55c to 94c and Restaurant Brands[RBD.NZ], that serial loser that runs the KFC franchise, up from the high 50s to nearly a buck!

The stocks I mentioned in March have gained considerably, with Ryman Healthcare[RYM.NZ] alone putting on an additional 30% in share price.

What has fundamentally changed though?

A B-I-G fat nothing.

Market sentiment has surely done a 180, but sentiment should be set aside for old Meg Ryan movies, not buying stocks as they go up in price.

Who was buying when they were going South?

Nobody, but market fundamentals were the same then as they are now, terrible!

Makes no sense to me and I think sentiment might come back into the market when investors getting in on rising stocks start blubbing when they realize that sentiment can quite easily change in markets.

A dead cat bouncing even higher means there is further for it to fall and it is going to hurt.

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