Loading ...The big story today is that the stock market is going up while the dollar is also strengthening! We at Alphas Edge hope that this trend continues, but we are expecting a reversal by the end of the day. Although we are a skeptic because commodities are also going up in value, which clearly means that it’s either the lack of inventory of the commodity or the increase in demand that’s pushing the price up (not the falling dollar). The truth is it is a little of both, inventories and production were dramatically cut and we are experiencing a slight increase of demand from no demand.
The run up in the stock market had been breath taking, the only close resemblance were those violent rebound during the Great Depression. This alone should send out red flags to all bulls or buy and hold kind of traders. We have recommended getting out of the market at 8,400 simply because at that time, evaluations were already irrational and stocks were priced in for a boom (not a recovery). What we didn’t see coming was the quick devaluation of the dollar to inflate equities. Our advice of going to emerging markets at the time however was on the money!
If you are buying stocks no, you are most likely late to the party. The risk of going down is much higher than the risk of going up. The only think that would push the market much higher would be the dollar going into freefall. At that point we would be faced with hyper inflation and serious economic issues. Today, the trend was broken; the dollar seems to be getting some support. Let’s cross our fingers and hope that the dollar doesn’t become a fiat currency.
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