Saturday, October 24, 2009

 

Time to pay attention to all markets

Last time anything interesting happened to the stock market was the end of a major bear market which took the Dow down approximately 53%. But was that really the end? I don't know and I still don't. I think it is a coin flip whether we go below the 6,500 level. So far I have no reason to believe that the current uptrend is ending but there are a couple of things going on in other markets which make it a good time to pay attention.

The dollar has gotten beaten up in the press recently but the truth is that the dollar index is higher than it was in April 2008 and it looks like the decent is slowing. When bad news is not causing a market to fall it can be taken as a sign that everyone who wants to sell the dollar already has.

Next is the ten year U.S. treasuries. The rate is up to 3.5%. Rising rates will be good for the dollar, bad for the economy. Hence the dollar and interest rates are poised to move in a direction that will be bad for the economy and the stock market.

We have had a pretty amazing rally since March so I wouldn't be surprised to see a pause. The trend is still intact and if the Dow gets above 11,200 the chances that 6,500 was the low improve dramatically. This trend has been good to us so far and there is no reason to jump off the train before it shows signs of weakness. So just enjoy the uptrend but watch out for a break of the trend line which runs under the lows. Then we will have to see how much this market really holds up.

DON'T FIGHT THE TREND!

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