Tuesday, October 5, 2010

Knock Out Punch

The bears got knocked out today. Just absolutely brutal. Not so much the massive spike but what it erased. Tops in markets are usually not one day affairs but multi day or multi week topping process. The last week or two looked like a classic topping process and today erased all of that. It most likely started a new leg up and then the market will have to have the topping process all over again. It would seem likely now that 1170 in the S&P would be visited and that possibly the DJIA will see a new high for the year. If the market is close to topping it probably moves the time table to mid/late October before the market would start going down in a serious way. Imagine the market as a bus. It takes awhile to turn a bus around compared to a smart car. Strong up moves usually don't just end with the market going straight down. Like I said, for over a week now the bus had been turning. So much for all of the effort by the bus driver.

Some will credit the service ISM today which adds to the overall confusion of what is exactly going on in the economy since that was another good number but the market was flying before that number came out. So I don't really think it had much to do with anything. So why the strength in the equity market? The dollar was getting pounded...again. The Euro looked like it was putting a top in also. We are on hold now also for that. Euro 1.40 seems likely at this point though that rise has to be coming to a close soon. I don't really know why I come to work anymore. I can roll over as soon as I wake up, take one look at my phone glancing at what world currencies are doing and tell you exactly what the market is going to do during the day. To circle back to the Service ISM number, the number wasn't bad. That should have been dollar positive. Instead the dollar lost more value after that number came out.

The latest iteration of this global mess is what is openly being called a currency war as every country is trying to destroy its currency the most. Sounds insane but somehow that means strong economic policy. In actuality it means the ponzi can live another day.

I was covering a little bit today licking my wounds. Maybe today was the top but it would shock me. Right now the central banks and the sloshing of liquidity is firmly in control and as long as the dollar keeps going down, stocks will keep going up.

The destruction of the this country will ensure your 401k statement will look good.

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