A sustained increase in stock prices over a period of time greater than one week is a market rally. Market rallies can last months or even years. There are up days and down days, but overall, the market moves higher over a period of time. The late 1990s saw one of the longest market rallies in history.
Market Rally was last modified: September 7th, 2013 by admin
Investors are excited about the fact that the Dow Jones Industrial Average has touched 13,000—a four-year high—as it rides the bear market rally higher.
Let’s take a step back, dear reader, and explore the reasons to justify this current stock market rally and growing bullish investor sentiment. Let’s see why investors (outside.
There are many reasons to be skeptical about this past January’s market rally. One of the most important key indicators flashing a warning sign is the fact that the stock market’s big rise in January occurred on very light trading volume.
But there’s another key indicator that is also flashing a red warning sign: insider selling..
It’s increasingly likely that stock prices will keep their positive bias going into 2011. That is, if there isn’t a major shock to the system like a new war or sovereign debt default. At the end of the day, the earnings picture, along with accommodative monetary policy, is supportive of rising stock prices.
Watching the charts on Monday, I noticed that the major stock indices broke below the intraday upward trend line at around 2 PM and reversed to the downside in a two-hour slide.
My feeling is that the failure to hold onto the rally that appeared to be in place was indicative of the lost momentum towards stocks, as reflected by the lower new highs on both the NASDAQ and NYSE.
I continue to be on the bullish side, but at the same time I am concerned with the mounting debt and deficit issues in the U.S. and debt issues overseas in Europe. In Ireland, investors are dumping Irish bonds on mounting speculation that the country will need to ask the European Union for bailout help similar to what Greece had to endure.
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.