Friday, 11 September 2009

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My thoughts on this rally....

The S&P 500 broke to new intraday highs yesterday confirming that the bear market rally is not over. In fact, it may go much higher. I don’t know what to make of this rally. Is it a bear market rally or a new bull market? You don’t want to continue to stay bearish as a new bull market starts. But my instincts tell me that there is something not quite right with this rally. For example, the market is continuing to rise on decreasing volume. Where is the professional money? Only they have the power to drive prices up, but we have prices go up on decreasing volume. Has the financial mess has really been fixed? Banks are still holding trash that they can’t get rid of on their balance sheets. Companies don’t seem to be at all anxious to start borrow or hiring new people. We could go all the way back to the 2007 highs, like some bullish pundits are speculating. But I think at some point “the crowd” will realize that the entire rally is fake, and it will collapse. That’s my view. For now, you want to be long. I think when we get to the end of this rally, something event will signal the top. I also think it will be fairly obvious to those who follow markets closely.

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