Posted by Frugal on 24th August 2010
Slowly through each wave of rise and fall, markets are revealing where the capitals are concentrating. The market leaders are no longer US, Japan, nor Europe, but Brazil, India, China, and Taiwan.
US market is facing heavy pressure again today. S&P 500 has broken support at 1080/1085, and then 1065/1060. The technical pictures are simply getting worse and worse. However, that is not so for Brazil, India, China, Taiwan, and other southeast Asian markets. They are far above July low by some 10%. The good news is that I believe these market leaders are not forecasting a repeat of depression, or a serious bout of recession. The bad news (for more mature markets as to emerging markets) is that the better days are not for us.
Going forward the stock markets will be increasingly selective. Given the extremely low interest rate environment, there are LOTS of hot money trying to find a home. But it’s probably not going to be in S&P 500.
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Posted by Frugal on 4th August 2010
I have been sitting on about 40% in cash (double at the “normal” 20% for me to compensate my high volatility stocks), trying to avoid a big fall that may have come. The last market drop wasn’t that big. In fact, it has risen back to about the mid-point of the trading range.
I’m guessing that for the next month until about mid-September, markets will stay in the bullish trend, possibly challenging the last high set in May again in all markets. When US dollar falls, it is good for all markets. Definitely you should keep an eye on Euro.
I’m going to pick up a few beaten up stocks here and there. It’s still not too late to buy something for your portfolio.
It may be difficult to fight off the deflation mentality out there. But I know in my guts that eventually the resolution is definitely inflation. This is not 1929-1932 anymore. America is not Japan either. A debtor country (USA) cannot afford a deflation. Besides, we’ve got helicopter Bernanke hyper-actively working overtime at every deflation scare.
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