From a fundamental perspective I feel much more comfortable today than I did in 2007; we don't have any major industry bubbles, P/E's are not to high and we seem to have passed the major congressional issues without sending ourselves back into a recession.
After testing the majority of available indicators I have isolated a trading system that has covers the major market moves. For the last two years 100% of the time ROC has broken below its 2.37 support the market pulled back, and 4/5 times Stoch hit its lower boundary the market rallied (the other time it came close... close only only counts in horses and hand grenades). Furthermore whenever Stoch went from being overbought to its normal purple trading range the Market also pulled back(in line with ROC). For the last few years this combination has proved highly effective, and lets hope it continues this way in the future.
So what now? For now it seems that we are safe. ROC has not broken 2.37 and the Stoch has not yet returned to its normal territory. How long this will last I can not say, but it seems that in the next few months we are at least due for a minor pullback, though given, the positive housing data I don't think it will be that bad.
Comments
QuantitativeExhaustion
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The other factor is the credit crunch created by the Fed’s zero-interest-rate policy. This has dried up the interbank lending market, because banks have little financial incentive to lend to each other. Without a well-functioning interbank lending market to ensure balance sheet liquidity, banks have been unwilling to scale up or even retain their forward loan commitments.
The end result is a loose state money/tight bank money monetary mix. And since bank money makes up 85 percent of the total, the money supply in the U.S. is still, on balance, tight, and below trend. That said, the broad Divisia M4 measure of the money supply has started to show signs of life in recent months.
Unfortunately, if the fed raises the discount rate to encourage interbank lending there would likely be a trickle down to an increase in margin rates and decrease consumer spending, which would obviously negatively effect the economy... I feel like we've got ourselves in a self defeating cycle.
QuantitativeExhaustion
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When do you think they will raise the discount rate? I don't think this will happen until Bernanke is ousted
Databased
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Thats a difficult question, on one hand raising the discount rate is good for the health of the financial system, but on the other hand its terrible for the economy. If it were to happen I would think he'd have to do it in the midst of a major bull run to attempt to negate the effect.
However, only once in history has the fed managed to increase the discount rate 3 times(in a row) without triggering a recession. So obviously he is going to be super reluctant to change it.
sverde1
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When was that?
QuantitativeExhaustion
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You need the dollar to go down for us to break the resistance.
OptnTradr
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Agree japans currency manipulation did wonders for their market :) something like 50% since November I think I heard on CNBC
QuantitativeExhaustion
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Is GB next or did the US finally say enough is enough?
The end result is a loose state money/tight bank money monetary mix. And since bank money makes up 85 percent of the total, the money supply in the U.S. is still, on balance, tight, and below trend. That said, the broad Divisia M4 measure of the money supply has started to show signs of life in recent months.
wallstcheatsheet.com/stocks/can-hyperinflation-be-a-real-threat-to-the-u-s.html/3/