Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Asset Bubbles Tend to Crash with a Vengeance - 29th July 16
Retirees Are Risking Their Life Savings on Junk Bonds - 29th July 16
The Next Recession is Coming - Expect Around 0% Returns for the Next 7 Years - 29th July 16
SPX is Shaking and Rolling - 29th July 16
Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - 28th July 16
FOMC Interest Rates and Their Impact on the US Economy - 28th July 16
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Why Are U.S. Stocks and The U.S. Dollar Rising?

Stock-Markets / Financial Markets 2010 Apr 23, 2010 - 06:33 AM GMT

By: Investmentscore.com

Stock-Markets

Best Financial Markets Analysis ArticleIs the US dollar fundamentally flawed?  We think so.

Is the US economy fundamentally in trouble?  We think so.


So why are these markets rising day after day, month after month?  Before we answer that question we want to address the following error that we think the typical investor makes.  Turn on the news and an investor will hear the exact reason the market rose or dropped on any given day.  How can this be possible?  When we hear these explanations we ask ourselves:

  1. Is it that simple?  With trillions of dollars floating around the global markets how can the local news or an analyst so simply “enlighten” us by explaining exactly why the Dow Jones rose or fell. 
  2. If analysts can conclude simple ‘cause and effect’ relationships between daily events and market movements, why can’t this same logic provide better forecasting results?
  3. Does that information help investors or distract investors and cause them to look in the wrong places for market movement insight?

It is our opinion that the markets are too large and too complex to explain short term movements with basic, every day events that make the news.  We feel that following this kind of short term analysis leaves an investor confused, and constantly chasing meaningless leads. 

We believe the following:

The investment markets move more like flowing water (capital) searching for lower ground (value).  When a market has fallen out of favor and has fallen low enough, capital will flow in the direction of the undervalued market, causing it to rise.

FOR EXAMPLE:

FROM 1970 – 1980:

FROM 1980 – 2000:

FROM 2000 – CURRENT:

CAPITAL FLOW SUMMARY:

So what does this mean and how can we profit from this understanding?   

We are interested in where money is flowing from a long term and intermediate term perspective.  Focusing on the big picture helps us to add capital to our positions near lower risk opportunities and it also helps prevent getting caught up in the short term, day to day “noise”.

So why are the US dollar and the various US stock markets rising?

In our opinion capital flows in and out of various markets similar to water splashing around in a pan.  For example, the markets just experienced a massive, historic drop in 2008.  The wave of capital rushing out of the market moved too far, too quickly.  The result was a massive “splash back” as capital flooded back into the market, creating a sharp rise.  Similarly the US dollar had been falling in value relative to nearly all currencies and assets for many years.  Markets are cyclical and even the US dollar will not drop in a straight line.  The result is a rebounding dollar that bounces higher as the Euro and other currencies take their cyclical turn lower.  In the long term, fundamentals do drive the markets; however capital is constantly sloshing in and out of the markets on a short, intermediate and long term perspective.

It is our opinion that it is more important to watch where the money is flowing on a macro scale than what the next “Unemployment” or “CPI” figures are.  We believe the commodities long term bull market is well in tact but that does not mean it will be heading up in a straight line; as markets never do.  We have designed a series of proprietary indicators that are designed to help determine lower risk and higher reward opportunities from a long and intermediate term perspective. 

To learn more about our service and to sign up for our free newsletter please visit us at www.investmentscore.com.

By Michael Kilback
Investmentscore.com

Investmentscore.com is the home of the Investment Scoring & Timing Newsletter. Through our custom built, Scoring and Timing Charts , we offer a one of a kind perspective on the markets.

Our newsletter service was founded on revolutionary insight yet simple principles. Our contrarian views help us remain focused on locating undervalued assets based on major macro market moves. Instead of comparing a single market to a continuously moving currency, we directly compare multiple major markets to one another. We expect this direct market to market comparison will help us locate the beginning and end of major bull markets and thereby capitalize on the largest, most profitable trades. We pride ourselves on cutting through the "noise" of popular opinion, media hype, investing myths, standard over used analysis tools and other distractions and try to offer a unique, clear perspective for investing.

Disclaimer: No content provided as part of the Investment Score Inc. information constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers, including the staff of Investment Score Inc. or their affiliates will advise you personally concerning the nature, potential, value or suitability or any particular security, portfolio of securities, transaction, investment strategy or other matter.  Investment Score Inc. its officers, directors, employees, affiliates, suppliers, advertisers and agents may or may not own precious metals investments at any given time. To the extent any of the content published as part of the Investment Score Inc. information may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Investment Score Inc. does not claim any of the information provided is complete, absolute and/or exact.  Investment Score Inc. its officers, directors, employees, affiliates, suppliers, advertisers and agents are not qualified investment advisers.   It is recommended investors conduct their own due diligence on any investment including seeking professional advice from a certified investment adviser before entering into any transaction. The performance data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that such calculations are not guaranteed by these sources, the information providers, or any other person or entity, and may not be complete.   From time to time, reference may be made in our information materials to prior articles and opinions we have provided.   These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current.  As markets change continuously, previously provided information and data may not be current and should not be relied upon.

Investmentscore.com Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife