Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Signals a Medium-Term Rally

Stock-Markets / US Stock Markets Aug 05, 2009 - 08:37 AM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleClaus Vogt writes: In last week’s Money and Markets column, I talked about probabilities. And I explained why I expect the current stock market rally to have legs. This market call, however, is valid for just a few quarters …

My long-term outlook hasn’t changed one iota!


Fundamentals are bad and getting worse. The huge economic imbalances created during the bubble years haven’t suddenly disappeared. They’ll rear their ugly heads again in the not too distant future, probably as early as next year.

But for now, it doesn’t make sense to fight the trend.

We’re witnessing a huge liquidity-driven rally, and I’m not willing to slug it out. That’s why my medium-term outlook has become bullish. The way I see it, it’s much wiser to adapt and go with the trend — realizing that it’s just a passing episode, a huge bear market rally if you will.

I know very well that the lousy fundamentals conflict with this bullish call.

Still, the huge wave of liquidity, of worldwide money printing and stimulus programs can dominate the fundamentals for a lot longer than seems possible. So I cannot let fundamentals underscore this bullish forecast … quite to the contrary.

It doesn't pay to fight the trend.
It doesn’t pay to fight the trend.

But the market can ignore fundamentals for a long time. And it doesn’t pay to fight the trend. Clearly …

The Market’s Message Is Medium-Term Bullish!

Right now there are no signs of tiredness. The market has delivered a clear medium-term, bullish message. Just some of the positive developments I’m seeing:

  • The market is breaking out of a nice inverse head and shoulders bottom formation …
  • Its 200-day moving average is rising, confirming the new uptrend …
  • Momentum indicators are reaching extremely overbought levels, which is actually typical at the beginning of an uptrend …
  • Strong advance-decline statistics, proving the breadth of the current advance …
  • And both the Dow Industrial Average and the Dow Transportation Average are rising to new highs for the year.
The market’s message is clearly bullish for the medium-term. And I expect this rally to continue.
The market’s message is clearly bullish for the medium-term. And I expect this rally to continue.

Bottom line: The stock market’s technical picture has become clearly bullish. And if history is our guide, we have to expect a continuation of this rally that started in March.

Yet …

This Stock Market Break-Out Has Been Greeted With Much Skepticism

Interestingly, the bullish market message is greeted by a high degree of skepticism. For example, on Saturday the headline of a major German newspaper, Die Welt (The World), read: “Stock market strategists are remaining doubtful.”

The U.S. sentiment indicators paint the same picture …

The Investors Intelligence poll shows only 40 percent bulls. Readings above 55 percent are considered a warning sign that a trend is weakening. So we’re far from this threshold.

And as you can see in the bottom section of the chart below, the Wall Street Sentiment Survey registered a huge jump in the number of bears last week, up from 41 percent to 61 percent.

Market

Source: www.decisionpoint.com

These two indicators tell me that Wall Street does not yet trust this rally.

Bull markets are said to climb a wall of worry. In other words, stock prices rise despite bad news. And that’s exactly what we’re witnessing here: Strong buy signals being greeted by huge bearishness — typical for the start of a bullish trend.

Remember that intervening rallies during secular bear markets are not uncommon. In fact, it happened during Japan’s lost decade as well as during the Great Depression.

But for the medium term, I suggest considering short-term weakness as a buying opportunity.

Best wishes,

Claus

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

TraderJoe
05 Aug 09, 14:50
too late

Claus, too little too late, your clients missed 40% of the rally hence a coin toss would have been more accurate/


Post Comment

Only logged in users are allowed to post comments. Register/ Log in