Tuesday, August 25, 2009

Bi-Polar Mr. Market, and the little (big) rally that Could...

This one's short and sweet. Remember back when I wrote my "psychology of trading" series? Remember how I said Mr. Market is most often extremely bi-polar?

Right now we are in the euphoria stage, where investors are piling onto the moving train that is this rally based on small tidbits of news that look great on the surface. An example is the housing data from today - Though home sales were up the only areas that saw real increases were homes below $100,000.00 - the very bottom trough of the market.

The jumbo loan market, where the banks are having to take the majority of their write-downs, is still totally dysfunctional (as it should be, considering the crazy-high asking price so money of these people who over-paid are asking). In fact, even the suburban markets from 10 years ago are hurting badly - you know the ones where most of the buyers are actual prime borrowers?

But the rally runs on, full steam ahead. Well, not FULL steam ahead. The last two days it's sort of stalled flat. Consolidation for a last big pop maybe? Hard to say. What isn't hard to say is that this rally COULD go another 100+ points from here and still be in serious bear territory. In fact in another 100 points the shorting opportunity might just be two steps above magnificent. See this chart for the breaking-news details! (The upper trend line is still a WAYS away, as well as the nearest weekly Moving Average).

Another little fun indicator of the stall is the fact that Obama was clearly trying to talk up the markets with his Bernanke-praise (A guy I personally think, hope and pray will go down in history as the LAST piece of the mass-incompetent Federal Reserve puzzle that was started 96 years ago). No go, Mr. President!

We will see soon enough how much steam this rally really has. Puttering yet? It's tough to tell. But there is much more drama our hyper-medicated Mr. Market has yet to act out. Much much more.

Happy investing all.


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