Stock Market Analysis

Tuesday, March 16, 2010

More Interest Free Money...

The US Market rallied today with the Fed's decision to keep providing interest-free (or nearly interest-free) money. The Dow closed up by 43 points today, pushing towards 52 weeks high.

The S&P500 joined the Nasdaq composite in making new 52 week high today, gaining 0.78% to close at 1159. Yes, today's Fed announcement continued to stretch an already over-stretched market and managed to hoax traders and investors watching on the sidelines into the market as volume surged with the rally. So, is this a good thing? Is the market going to continue going upwards? In the mid to long term, YES. But the short term is now extremely uncertain and dangerous.

I see a classic scenario playing out here...

In an already toppy market where more and more investors are sitting on the sidelines for a significant period of time, a sudden "good news" convinced many of them to go back into the market, creating an exhaustion peak and then we know what follows... the slaughter.

The market will make strong and steady 52 week highs but not without first a short term pullback to digest this extreme overbought condition.

For now, the Dow remains in all out bull trend.


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