Why The Rally Is Fake

Source: What Is That Whistling Sound There is something unsettling about this latest stock market rally.
I asked myself, what has changed?


Is there less uncertainty in the markets?


Are economic reports exceeding our expectations?


Are southern European states running balanced budgets or continuing to slide backwards and needing even larger bailouts/handouts?


Are bullion producers overwhelmed with supply or orders for more gold?


Has the banking system become better capitalized and more responsible?


Let's review some charts that give quite a variation of indications:

Gold

Gold seems to be indicating a pull back as low as 1500, at least from a technical standpoint.  But is something else brewing beneath the surface?

S&P

The S&P rally to 1360!  I will believe that when I see it.  Perhaps if QE3 is implemented.

VIX

Vix seems to support a rally as the S&P chart suggests.  Point and Figure charts were indicating Vix of 74 only a week ago.  Go figure.

Copper

Copper at over 8 bucks!  That would be something.  I think Point and Figure are faking us out on this one.

Treasuries

Treasuries at 150, only if the S&P, copper, and vix charts are very wrong.

Libor

The dark lord Libor is climbing again.  Certainly reminiscent of 2007 and 2008.

Ted

The Treasury - EuroDollar spread is climbing too, not in a spectacular manner, but enough to question the direction we are headed.

Of course the markets don't listen to my view, they just do what they do.


It will be interesting, even breathtaking, to see the action this autumn once transaction volumes pick up.

My gut feeling is that the market is faking us out and preparing to deliver considerable punishment to the bulls.