Summary for Week Ending 12th May 2007
Since the last report 2 weeks ago the market has managed to keep up with its bullish fervor. There was no report last week due to the simple reason that conditions had not changed. This week is much the same but there is a little more to say.
The market has simply being rocketing along since the sub-prime fakeout which caused such a shudder through the market (and around the world). Its almost as though that little moment in time it provided a slingshot for the market since its rate of ascent has been extraordinary.
Marked up on this weeks chart is the market all time high of 1553 points on March 24 2000. Its such as long time ago, you have to scroll the chart such a long way back just to find it. Whilst the DJIA has made it to record territory, that same cannot be said for the broader market S&P500 which has been lagging a little in the performance stakes. Tthe NASDAQ is still such a long way below its old record highs it may take a generation of compounding inflation before we see those market levels again. Back to the S&P 500 and its recent runaway success.
For the past few years the market has just been eking out a return, something which comes as a shock after the stellar performances of the late 90's. This creeping behavior, has certainly managed to store a tremendous amount of energy in the system, with the bulls finally unleashed in wild abandon. You can only describe what is happening now as a final move before a correction simply because fundamentally, the markets simply should not be doing what they are doing, and the future certainly does not describe this rosiness.
If common sense has indeed gone out the window, then there is no reason not to go with the flow, just so long as you bear in mind that you are on the good ship Titanic and eventually you will hit an iceberg. Look for increases in volatility, big days up followed by big days down followed by big days up. This is a wildness that is always seen in the final breath.
What a marker for a regime change in this process?
So far in this run, the biggest cumulative decline has been 30 points in 5 days which recovered in 2 days. If we see a 31+ point decline that fails to recover in a 5 day frame then its time to look for the life rafts. Knowing what to look for means we can enjoy the ride. I certainly intend to.
Looking ahead... more of the same.
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