In my March 7 update I concluded.
"So large falls in the short term probably depend on the market coming to believe that:
a. Commercial real estate is some sort of repeat of residential real estate (hope Geithners stress test include defaults from builders on owners in this area - 25% of banks loans)
b. Insurance becoming part 2 of the banking crisis (again based on asset purchases with money that they need to pay back in the future - in this case to policy holders).
c. More panic in credit markets.
If not we could have a bounce despite continuing deterioration in economic conditions. "
Well we certainly had the bounce in stock markets! I closed down about half my short positions after the bounce lasted 2 days and other than that not much change. I am currently short the Spanish market and a small short on the French market. The European markets have generally only advanced in response to the US market jumping each day so clearly European markets do not have an upward momentum of their own at this point.
The so called good news that commentators have ascribed the bounce to has been hardly convincing.
1. Bernake saying the recession may end this year if everything goes right. Hardly news he's been saying the recession "may end in 6 months" for the last year.
2. Banks saying they are profitable (as long as they don't have to take count the losses).
3. Housing starts increased from virtually nothing to slightly above virtually nothing.
Basically I am waiting for a blow off top to put more shorts on. I will sell my shorts if there are real signs of a sustainable turnaround or if the market has a low volatilty gentle trend upwards (as occurs in bull markets).