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A Banner Year May Lie Ahead
Posted on 09/25/2006 16:38:48 | Link | Post Comment
0920 EST Wednesday January 11 2006
Good Morning: As we suggested might occur following a notable sell-off in US Treasuries and a lower opening yesterday, Equity markets rallied strongly setting many new multi-year or all time record highs in the process. While that may appear to be a recipe for continuation today, there are some divergences creeping in that could cause the markets to consolidate some, now that we have broken above Dow 11,000 and are poised at just below S&P 1,300. The markets are looking a little stretched here and although some more upside does in fact look quite likely and logical: Often, behavior around big number breakouts can be quite perplexing and so some testing could recur.
Meanwhile the Energy markets are beginning to break down technically and if the inventories come in significantly larger than expected today, that could seal the deal for substantially lower prices, barring unforeseen developments in Iran. Natural Gas is plunging again and yesterday we managed to scalp some nice money out of a few Natural Gas trades.
The fact that US Treasuries are starting to decline, supports our view that the "Inverted Yield Curve" scare a few weeks ago was just that: A scare. The Treasuries may in fact be anticipating a stronger than expected quarter of growth for Q4 2005 that could surprise by as much as several percentage points above expectations. That may be a long shot, but stranger things have happened and after 10 straight quarters of 4% growth, the propensity to have some kind of surprise blowoff to 6% plus or even higher cannot be ruled out. After all, if the US Equity markets are the most sensitive indicators of future economic growth, they surely must be anticipating some heady growth dead ahead, given the stunning rally that began to emanate out of the October lows, that began to unfold just 6 weeks after one of the worst series of catastrophes to ever hit the US Gulf Coast and attendant problems left in their wake. In addition, with European bourses having been accelerating higher in the 2nd half of the year, they too have been anticipating better European growth and then in addition, led by the Japanese Nikkei's riveting 40% plus advance over the past 6 months, along with Mexico and most of Latin America and the rest of the World, many Middle East markets doubling or more and Russia's own World beating performance, better times must seemingly lie ahead.
On top of that, as we count down the days to the coronation of Benign Ben Bernanke as Chairman of the Federal Reserve there are some compelling historical implications that some kind of all time banner year may lie ahead and the first 5 days of January would confirm that.
Trade Well
From the Desk of Savant
Good Morning: As we suggested might occur following a notable sell-off in US Treasuries and a lower opening yesterday, Equity markets rallied strongly setting many new multi-year or all time record highs in the process. While that may appear to be a recipe for continuation today, there are some divergences creeping in that could cause the markets to consolidate some, now that we have broken above Dow 11,000 and are poised at just below S&P 1,300. The markets are looking a little stretched here and although some more upside does in fact look quite likely and logical: Often, behavior around big number breakouts can be quite perplexing and so some testing could recur.
Meanwhile the Energy markets are beginning to break down technically and if the inventories come in significantly larger than expected today, that could seal the deal for substantially lower prices, barring unforeseen developments in Iran. Natural Gas is plunging again and yesterday we managed to scalp some nice money out of a few Natural Gas trades.
The fact that US Treasuries are starting to decline, supports our view that the "Inverted Yield Curve" scare a few weeks ago was just that: A scare. The Treasuries may in fact be anticipating a stronger than expected quarter of growth for Q4 2005 that could surprise by as much as several percentage points above expectations. That may be a long shot, but stranger things have happened and after 10 straight quarters of 4% growth, the propensity to have some kind of surprise blowoff to 6% plus or even higher cannot be ruled out. After all, if the US Equity markets are the most sensitive indicators of future economic growth, they surely must be anticipating some heady growth dead ahead, given the stunning rally that began to emanate out of the October lows, that began to unfold just 6 weeks after one of the worst series of catastrophes to ever hit the US Gulf Coast and attendant problems left in their wake. In addition, with European bourses having been accelerating higher in the 2nd half of the year, they too have been anticipating better European growth and then in addition, led by the Japanese Nikkei's riveting 40% plus advance over the past 6 months, along with Mexico and most of Latin America and the rest of the World, many Middle East markets doubling or more and Russia's own World beating performance, better times must seemingly lie ahead.
On top of that, as we count down the days to the coronation of Benign Ben Bernanke as Chairman of the Federal Reserve there are some compelling historical implications that some kind of all time banner year may lie ahead and the first 5 days of January would confirm that.
Trade Well
From the Desk of Savant
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