4 replies to this topic

[arbman]

The utilities led the advance earlier, we see the financials rallying now, the tech and industrials did not underperform like the 2004, 2005 tops. RUT pulled back much more than SPX, it also underperformed in the upside, however when the RUT:SPX ratio peaked in 1990s, it took another 4-5 yrs for the market to top for the very long term picture.

At this point, there is probably more room for a trading range until May, I would favor more downside than upside first here though. The USD is at the multi year lows, confirming the too much liquidity hypothesis. However, these could be all near another peak at this point ahead of the 10 wk cycle low in May and another low that is still projected for the summer. The increased volatility actually confirms that there is indeed a high probability that the liquidity is getting less according to the following commercial credit growth...

Good luck,
- kisa

[Cirrus]

kisacik, Does this indicator account for the possiblity of massive liquidity coming in from overseas? IMO one thing we see going forward will be foreigners buying more US assets (RE, stocks) and less 'paper' with their US dollar inflow. Watching junk bonds things still look OK as we typically get a nice selloff just before a market swoon. I have to admit I'm a bit concerned about the market. It's kind of like playing internet stocks in 99 and 2000. You know the things are worthless but you 'trade' them anyway. The maket isn't bad but right now it's going up. I wouldn't hesitate to go comletely flat if the weather changed here, though.

[arbman]

Cirrus, why should the foreigners buy the US markets while the USD is loosing value faster?!? I see the decline in the junk spreads as a double bottom at this point before heading higher. I think it is kind of evident from the (under)performance of the RUT... - kisa

[Cirrus]

The worlds financial system would undergo a virtual catastrophe if the foreigners didn't recycle US dollars. The dollar must slowly adjust in value. It's my opinion that the Chinese and others will begin to shift their purchases away from treasuries toward real assets over a period of time. Thus, the Chinese announcement of the worlds biggest 'hedge fund' recently to invest their dollar assets. I would bet they buy more real assets (commodities) and global (including US) equities with thier $1.25 trillion dollar mass of cash. Don't forget about their tens of billions of inflows monthly.

[skott]

thanks kis for the post. I feel the same but every bad fundamental or bad news is turned into a positive these days. Rick Santelli was talking about how the dollar has been losing, losing, losing value and he ended with "us stocks are relatively cheaper because of the weak dollar , buy some!" nevermind that if you are a foreigner you've been losing money for years here and never mind that poor U.S stock investors are losing double....... our market is underperforming europe, asia, etc and our dollar is tanking. whoopee! buy some more fools!