As we approach the end of the year it is looking more and more likely that a Christmas rally may be coming. The charts of both the 10-year Note and the 30-year bond are looking very bearish. If they break down there could be a flight of capital to the stock market.
On the other side of the coin stocks seem to be breaking out of their recent consolidation and appear to be headed higher. What could torpedo this is the continued strength in the dollar unless this strength is met with a change of sentiment.
Up to now market sentiment has been that a strong dollar will cause inflation and is bad for the market. This relationship will change at some point in the future if the currency strength is based on a fundamental shift in the economic outlook of the US economy.
Turning to the economic numbers that are coming forward it appears that there is a modest recovery on its way. It appears that the stimulus is finally taking hold and with the continued pumping of cash into the economy that there may be a glimmer of hope. To be honest I am not really surprised by this as if you throw enough money at something it will eventually either recover or blow up.
This time around it appears as if the world still has enough faith (unwarranted in my opinion) in the US economy and the Federal Reserve to cure the market ailments and therefore we will have to wait for the blowup to occur in the years to come. The renewed confidence seems to be feeding into more risk taking and a rise in the stock market. Should this take hold it could result in a rally in the market.
Looking further out I am still completely convinced that in our lifetime we will have a severe depression to deal with, but for now I will ride on the tail of the illusionary recovery until it rolls over and dies.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment