David Rosenberg turns Bullish ?!

In April 2010, just before the biggest decline in the biggest bear market rally since the Great Depression, Jeremy Grantham, a very well respected portfolio manager, wrote in his quarterly letter that — in summary — no matter what, markets will keep on rising, and he had reverted his bearish stance to post this over bullish report, and showing that he is capitulating with the trend. I spotted this at that time as a great contrarian opportunity — and it turned out to be one.

Just a few days ago, a long term bear — probably the longest term bear ever, excluding Robert Prechter — turned his head upside down to become a bull. Here's another Bull, disguised in a Bear costume, pretending that there are fundamental and technical reasons for his bullish standpoint.

To be honest, I believe that he had to do this as his firm needs to make money, and that having a bear as a chief strategist is not very profitable indeed. But then one would have to question his integrity, and I would certainly not be that person.

The deflationalist has also given up on the US dollar, and joins the 99% person of the crowd who believes that this poorly managed, highly despised currency will collapse soon.

CNBC — If the bull market will end when the last grizzled bear comes out of his den and comes to the table, then hold onto your portfolio, because it may well be dinnertime.

David Rosenberg, the curmudgeonly senior strategist and economist at Gluskin Sheff in Toronto, told clients Wednesday in his daily newsletter that he’s finally given up his long-held position that the market is heading for a thud, if not an all-out crash.

Even as the major averages have risen 90 percent off their March 2009 lows, Rosenberg hasn’t been convinced, arguing that the economy is still too weak and investor sentiment way too giddy to justify such a relentless rally.

No more.

“This is not about throwing in the towel,” he writes, “it is an acknowledgement of what the market internals are flashing at the current time from a purely tactical and technical standpoint.”

For more than two years now Rosenberg has been advising clients not to trust the rally, defending bonds against “inflationistas” and warning that deflation remains the far greater danger. 

But he now marvels—somewhat incredulously, to be sure—at how investors are dispelling concerns over downward GDP revisions, soaring commodity prices, supply disruptions after the Japan disaster and looming European debt default risks.

“The (US dollar) is on a one-way ticket south and so far has been orderly—will that be sustained is anyone’s guess,” he writes. “For now it is being viewed as fodder for the global liquidity and risk-on trades.”
[...]
But mostly, he sees the market trending toward an “important technical signpost” which he says is a “Holy Grail” that entails “new highs led by higher volume.”
[...]
These moments when major market bears give it up are often the signs of a peak in sentiment, but anyone so far who has tried to step in front of this rally has gotten crushed.

“Market internals are too strong to ignore right now—NYSE advancers beat decliners by a 3-to-1 ratio (Tuesday); the Dow transports soared 1.9%; and the small caps beat their major benchmarks,” Rosenberg says. “My overall macro concerns have not gone away, but these market facts on the ground are tough to ignore.”

I would side with Marc Faber on this one:

The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market.

Thanks to my friend SS who reported this.