I was too early to close all long positions when the DOW was at 10600. But thankfully, they were mostly financials which are now much lower than it was then.
The DOW rallied due to dollar weakness, with the EURO at 1.4, and commodities prices soaring through the roof.
Fundamentals remain weak. It is definitely not enough for CHINA alone to be growing while the other 2 big zones (EURO and US) are not growing rapidly enough. Japan too is facing a meltdown as its industries are hurt by the yen.
I would like to point out that many investors are still sitting at the sidelines. Some are rushing to take advantage of the momentum, while many I think are waiting for the market to correct deeply.
This seems to be dejavu of what happened in April 2010. Everyone was wondering why the market kept climbing, with no clues as to what the economy was really like.
Many became greedy and bought equities when the DOW was at 11100. They were saying how cheap equities was, they projected growth using spikes in commodities (like what’s happening now). Then, the market became anxious, and the flash crash happened…. And that must have hurt. I remembered at that time, US STEEL was being pumped by Goldman Sachs. Now the same thing is happening. This time, its not the steel industry. It’s the copper trade.
It may end badly if demand fails, and the 2011 deficit of 200k tons become a surplus instead. Chile has increased production, so has Freeport. However, lower ore grade is keeping copper prices elevated.
Nevertheless, the market is overbought, and this is an omen to a small or maybe larger correction. Dow of 10350 is still possible. Others are predicting a test of September levels. I will just keep watch.
1 comment:
I see the Dow correcting to 10100(trendlines). Much like you I don't like this euphoric rise on absolutely no fundamentals. Sitting half on the sidelines and watching and waiting
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