LunaticTrader

Investing with the Moon

Outlook April 27

Posted by Danny on April 27, 2010

Downside action is very mild so far.
The Nasdaq successfully kept above the 2450 level.
The market is even attempting at new highs again.
We may still get a sudden drop this week, with Full Moon coming tomorrow.
But chances are increasing that this rally will continue into mid-May.

Why are the stocks so resilient?
Well, it takes sellers to drive prices down.
The problem is this: when somebody sells his stocks where he is going to put the money?
In the bank it earns zero interest, in bonds one is at risk of rising interest rates, and real estate still doesn’t look very healthy either (plenty of oversupply, and also at risk of rising mortgage rates).
Gold is doing pretty well, but few people want to put all their savings in gold or silver.

So basically, people who own stocks stay into stocks by lack of any good alternatives for the moment.
And this means the stock market goes on creeping higher, because all it takes is a few traders who cover shorts, or some scared investors who gradually re-enter the market after the 2008 crash.
This can go on for quite a while, till stocks are way overvalued again.
This also means it is becoming increasingly dangerous, and we may see a very sudden drop some time this year or next.

All the current government interference in the economy, artificial low interest rates, the “borrowed recovery”,.., risks creating an even bigger monster than the one they claim to have slain.

The stock market is at its most dangerous whenever it appears very safe and stable.
So watch out.

Good Luck, Danny

Post a comment (disagreement also welcome):

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: