Capitalogix Commentary for the Week of 04/5/10

The rally continues, and the S&P 500 has gotten back to new highs for the past year.  Pretty
impressive on many fronts.  How does it compare to other markets
though?  This chart shows how several other world markets have done in the past twelve months.

100405 World Market Similarities

This quick glance around the globe shows remarkably similar performance across the markets. Note how closely the price patterns and peaks and valleys are to each other.

100405 global-markets related It brings up two questions:

  1. Are these countries each really doing the same things right and
  2. Are world-wide expectations and responses really this similar?

To get a closer look for yourself, here is a link to the charts.

Perhaps more importantly, it brings up a
third question:
What's really causing the markets to behave so

Recognizing What Is Happening, Is the First Step to Profiting From It.

To profit in trading, it's more important to recognize what's happening,
rather than to understand what's happening.

The strength of the rallies don't make sense to me based on logic.  However, trends don't depend on logic. So, I dusted-off my copy of Trend Following and will simply ride the bucking

But I Still Want to Know Why … Don't You?

Occam's Razor suggests that the simplest explanation is most likely to be correct. So, when markets move in a virtual lockstep (despite many unsettling global variables), let's look for simple explanations.

Here are a few ideas (ranging from silly to plausible).

  •  After watching the movie 2012, world leaders decided the one who dies
    with the most toys wins.
  • Human nature is consistent across cultures.
  • The recession is over, and we have begun a new global bull market.
  • Something unusual is happening, and we just don't know what it is.
  • Who Controls the MarketsWith consumers mostly out of the market, institutions figured-out how to buy and sell from each other, making relatively easy profits with minimal risk.
  • Governments agreed to temporarily suspend speculating in each other's
    markets, other than in the normal course of business.
  • Governments and central banks agreed to cooperate. Don't fight the Fed, especially when it's a cartel of Feds.

From a Traders Perspective …

There are still many things to watch, from a trader's perspective, despite the strong correlation among markets. For example: divergence patterns can provide early indications of moves in either direction; relative strength comparisons can show which markets are more likely to over or under-perform; and volume spikes can indicate something unusual happening. Nonetheless, the simple observation is that markets are trending higher, so the safest assumption is that the trend continues until evidence proves otherwise.

My grandfather used to say: "you can fool some people, some of the time; but you can't fool all of the people, all of the time." He was not an exceptionally well-educated man, but he was a professional wrestler … so he knew something about stagecraft.  My guess is that one of the actors breaks character soon.  That tends to happen in most cartels.

Focus on the Global Economy as Debt Worries Rise.

Greece continues to stay in the news because a sustainable debt solution has not been agreed to and implemented. There are reports that smart-money is starting to bet against Greece.

100405 Greece Still Needs a Handout

America is not the next Greece, says Simon Johnson, MIT professor and former director of research for the IMF.

Have a good week.

Business Posts Moving the
that I Found Interesting This Week

Lighter Ideas and
Fun Links

that I Found Interesting This Week

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