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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Rally Technically Irrelevant

Stock-Markets / Stock Market Sentiment Oct 14, 2009 - 10:34 AM GMT

By: Kevin_George

Stock-Markets

If any further evidence was needed of the “all markets versus the dollar” ponzi trade, it’s the new highs for 2009 that we’re now seeing across the financial markets.


All of these new highs are occurring, within a week, or one day of each and this type of price action highlights how asset correlation is a dead donkey and the “Efficient-Market hypothesis” is nothing but a myth. If you’re an investor in today’s, you’re either in the dollar, or you’re out.

The MSCI world share index, S&P 500, FTSE 100, Gold and Oil are all hitting new highs within a one week timeframe, while financial news channels are cheering for the “Technically Significant” 10,000 level on the Dow Jones Index as confirmation of the bull market.

The price action is being driven by hype and hope, with no respect for the downside. The boom and bust cycles which have been a signature of the markets during the credit-fuelled era of loose monetary policy, have shown that human emotion doesn’t allow for corrective pullbacks in price as it brushes risk and weak fundamentals aside and throws up ridiculous and confirmative statements, such as the “jobless recovery”.

Economic recovery cannot be led by a stock market rally and this type of one-way thinking and one-way trading only causes further distress in the long run, for those who chase yield from here. This is a borrowed stock market rally, driven by stimulus dollars, which is ignoring fragile conditions and focusing on positive lagging indicators to push every asset higher, regardless of fundamentals. Just as 10,000 on the Dow was technically irrelevant on the way to 14,000 and back to 6,469, 10,000 will be technically irrelevant now.

For those who wish to roll the dice, there may be further gains ahead. It must be noted however, that if all markets are going up against the U.S. dollar, then all markets can come down against it. We are merely awaiting a catalyst which will force markets to sit up and take notice of the fundamentals that they are choosing to ignore.

By Kevin George

I am an independent financial analyst and trader.

© 2009 Copyright Kevin George - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Simon
14 Oct 09, 15:57
Envy?

Missed the rally ?

Worse shorted the rally ?

Si


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