How’s this for a statistic? In each of the last 6 first trading days of each month, the DOW has gained about 850 points or approximately 42% of the entire 6 month gain. Almost half of our gains since summertime occurred over 6 trading days!
We are now facing the beginning of a new month next week and the markets are attempting to rally off the very first pullback since November. This pullback comes on the heels of a bone-fide extemporaneous event. A real event, not just a fictional financial one. The change in the Middle East’s status quo could bring real change to the economy of the world. Its potential is so big that it could even dwarf Uncle Ben and his digital printing press, but that remains to be seen.
Today the markets are getting the new 401k money to work in the sectors that have been most successful yet have corrected somewhat. Materials, grains, metals, oils, technology and the “annointed ones”. And the rally today looks very similar to past moves–low volume and program driven. The feeling is that any crisis has mostly past and it is time to get back to the all bullish all the time market again. Our near term bounce forecast to SPX 1320 has been mostly met.
With about $200b in QE money still on tap, anything is possible. But as our friend Chess alluded to, something has changed. Volatility and uncertainty are picking up. Very large percentage moves denote uncertainty. And considering how spectacularly extended markets are–as measured by almost any techinical or sentiment-oriented measure–it would be wise to scale back expectations for both directional trading and intermediate-term investing.
This FED-driven market rally is the second biggest and fastest rally in modern history. It’s two year anniversery is coming right up. I doubt that Prechter is right forecasting Dow 1000, but there is way too much new and bullish money flowing through the veins of the market. It sure feels like it is time to do a little real bloodletting.
Comments »