April 18, 2009
One of the advisory services to which I subscribe describes yesterday's
price rise as being an upside breakout. This service agrees with Michael
Ashbaugh's analysis on Tuesday that over the intermediate term, the trend
is still relentlessly higher. It's overbought and ripe for a pullback at
any time, but the advisory service suggests that the overbought condition
may be indicative of the strength of this trend rather than an indication
that the market is apt to turn around. Investor sentiment is dangerously
positive, but the market keeps rising, anyway.
My own interpretation is that most institutional
investors are expecting a pullback and are waiting until then to commit
the greater part of their money. And that suggests that the stock market
will continue to rise even in the face of bad news until the professional
investors give up and climb aboard this bus. Then the market will turn and
correct after most of them no longer have much money to take advantage of
Meanwhile, numerous articles are appearing advising us
to position ourselves for the global turnaround: Five ways to set up your portfolio for a global market recovery.
It may be that investors have convinced themselves that the U. S. economy
isn't going to collapse, that there are fabulous bargains out there for
the patient investor, and that there won't be a better time than now to
hunt for bargains. Even if the market takes years to recover, it looks
like a better bet than other investment vehicles.
I'm speculating that one reason this market keeps
rising is that there's a lot of money on the sidelines, and a lot of
caution about re-investing it after the shellacking that investors have
taken in this grizzly bear of a bear market. That means that there's still
plenty of money left to fuel the market upward.