In my previous post (www.tradingview.com/v/bplrXyXD/), I emphasized on how FED's easy policy has created no other place for money to go but equities, as this pump of liquidity triggered a speculative bubble in asset prices, in this case bonds and stocks, as big institutions used this money to capitalize on an easy FED.
I also mentioned that this easy money will probably continue for the short term(months), as economic conditions have weakened recently, while the FED is in a transitional phase. And that would support markets for the short coming period. However, the FED will eventually start to withdraw, for one of two reasons, either economic conditions stabilize, or forced by financial instability concerns(expanding the bubble in bonds further). In both cases, yields will spike, and this speculative cycle will reverse.
Some would argue that historically, markets aren't over-valued, prices are at normal levels. According to goldman sachs research, four valuation methods suggest the S&P500 is overvalued at current levels.
Technically speaking, I plotted a 36-month long term simple moving average envelopes, a simple moving average with two averages above or below by 25 percent.The average tended to confine price most of the time, while in some cases, extreme swings towards the upper and lower bands occurs, which indicates excessive bullishness or bearishness, resulting from unusual market conditions driven by bubbles in certain areas in the economy,
I am not saying that we shouldn't participate and gain from these bullish trends, but common sense suggests that there is no real rational reason behind this rally but the excess of liquidity, so watch out and Keep Safe :).
twitter.com/thefxchannel
thefxchannel.com
I also mentioned that this easy money will probably continue for the short term(months), as economic conditions have weakened recently, while the FED is in a transitional phase. And that would support markets for the short coming period. However, the FED will eventually start to withdraw, for one of two reasons, either economic conditions stabilize, or forced by financial instability concerns(expanding the bubble in bonds further). In both cases, yields will spike, and this speculative cycle will reverse.
Some would argue that historically, markets aren't over-valued, prices are at normal levels. According to goldman sachs research, four valuation methods suggest the S&P500 is overvalued at current levels.
Technically speaking, I plotted a 36-month long term simple moving average envelopes, a simple moving average with two averages above or below by 25 percent.The average tended to confine price most of the time, while in some cases, extreme swings towards the upper and lower bands occurs, which indicates excessive bullishness or bearishness, resulting from unusual market conditions driven by bubbles in certain areas in the economy,
I am not saying that we shouldn't participate and gain from these bullish trends, but common sense suggests that there is no real rational reason behind this rally but the excess of liquidity, so watch out and Keep Safe :).
twitter.com/thefxchannel
thefxchannel.com