The Zero Gravity Market
Friday, February 18, 2011 at 01:31PM We’ve heard a lot of comments recently that the market’s levitation since September 1st is unlike anything ever seen in the equity markets. All the market does is go up! Some say the rally is temporary and the result of the Fed’s fire hose of liquidity. They say that when the Fed turns the faucet off, the party will end. Only time will tell what the market will do going forward, but we were curious to see how common steady upward moves like we’ve seen since September 1st really are, and what they may portend for the market going forward.
To see how common these moves were, we compared the market’s pattern since September 1st to all other periods of the same length in the history of the S&P 500. We then calculated the correlation coefficient between each of these periods and the current period, and found five periods where there was a correlation coefficient greater than 0.97 (1.0 = perfect correlation). While the percent changes in the prior periods vary, the similarities between their patterns and the current period are striking.
Continue reading... (Must be a Bespoke Premium member to view.)
Reader Comments (2)
In the linked article ... Exhaustion Of Quantitative Easing Starts The Mother Of All Bear Stock Markets ... I write that the chart of the S&P, SPY, manifested three white soldiers, and a dragon fly candlestick, at the top of an ascending wedge; this is a terrifically bearish formation. The S&P, will be forever falling lower on exhaustion of quantitative easing, as an Elliott Wave 3 Down commenced on Friday February 18, 2011 in the S&P, at a price of 134.53, as seen in the chart of SPY Weekly.The world has entered into Kondratieff Winter.
Exhaustion of quantitative easing has started the mother of all bear markets, and a failure of traditional carry trade investing, the US Federal Deficit, a soon coming municipal bond funding crisis, and a worsening of the European sovereign debt and banking crisis, will be the dynamos that will propel the world from the Age of Leverage and into the Age of Deleveraging.
The world is passing from The Age of Leverage characterised by sovereign debt expansion, currency inflation, credit liquidity, stability, stock and junk bond inflation, economic growth and expansion and prosperity … and passing into The Age of Deleveraging characterised by failure of sovereign debt, currency deflation, credit ill-liquidity, instability, stock and junk bond deflation, economic contraction and austerity.
The primary money good investment will be ownership and physical possession of gold and silver.
Much, much more commentary is found on the linked article
Looks like the trend will be challenged tomorrow with the news from the Middle East over the weekend. Crude up over 9% as I type.