This is the question that every trader must ask themselves, and to do this they must consult the charts. Relying on emotions, or other so-called indicators like magazine covers, and how many posters on a single chat board are negative or positive are the type of indicators that are best performing after the fact in our memories, because we remember the hits and forget the misses.
Here is what the SP500 chart says. There are some divergences among the various indices, but lets use the SP as a bellwether for now because of its heavy concentration of financial stocks. Typically we use the Russell 2000 to lead, and the Nas Comp and SP 500 to confirm. The Dow Jones is for tourists.
It is absolutely essential to keep in mind that the Fed and Treasury are going to try and print their way out of their banking dilemma. This will likely cause inflation, and a bubble in some assets. The stock market is one likely place.
If the bubble *sticks* we may see a high between now and the end of April. At that point, we'll know if the reflation is sticking in the real economy. If not the stock market may retest the lows. If the Fed does a good enough job of blowing another financial asset bubble, we may see a particularly interesting autumn in the markets this year. Stay flexible, and let's see what happens.
"Everything was not fine in 1929 with the American economy. It was showing ominous signs of trouble. Steel production was declining. The construction industry was sluggish. Car sales dropped. Customers were getting harder to find. And because of easy credit, many people were deeply in debt. Large sections of the population were poor and getting poorer.
Just as Wall Street had reflected a steady growth in the economy throughout most of the 20s, it would seem that now the market should reflect the economic slowdown. Instead, it soared to record heights. Stock prices no longer had anything to do with company profits, the economy or anything else. The speculative boom had acquired a momentum of its own."
And after the hubris peaked came the bonfire of the vanities, the dark decade of the 1930s, and the madness that shatters nations.
