Inflation at highest rate in 6 months and the market is rallying - TELL ME WHY!?
I'm getting more and more frustrated my this market. I'm ready to short the entire thing. I feel like we're in a car with a drunk driver right now and it's time to get out!
Who's with me!?!?!?!
Answers
4085 points
EthanR answered one year ago …
Rob, the market will never do what you want it to do. It will always do what it wants to do. Let it rally till the point of resistance, and then short it like crazy, or go long on ETF's that short the market. Whenever the market sells off 200 or 300 points, there will always be people who come in looking for bargains.
The thing to do is to watch the volume. Is the rally on more or less volume than the recent down days? If less, that tells us that the rally will be short lived. If more, then it wants to go higher. I don't feel like we're in the car with a drunk driver, I feel like we are in a car with NO DRIVER!
2775 points
Oldman answered one year ago …
Absolutely agree with EthanR's assessment. I haven't bought a U.S. security in 3 years; did purchase some CEFs that pay >10% last Fall and in Jan., when they were beaten down.
Read more from Oldman
158 points
marketdrop answered one year ago …
I am long and staying that way. Reason-Momentum Index-BULLISH,Sentiment index-BULLISH,Strength index-Positive. Watch the 50 &200 day moving averages.
Read more from marketdrop2082 points
alanj answered one year ago …
I am assuming by market rally you are referring to the time period from Feb or Mar to the middle of May, and not the recent one or two day rally. One possible cause is when the Federal Reserve lowers interest rates on new loans the market generally considers this as positive news. When the Fed lowers rates this encourages businesses to borrow, which in turn they will invest in their business which will hopefully result in more growth. More growth means higher stock prices. So, when the Fed lowers rates this can push stock prices higher. Even just the announcement can effect the market. ( But, not always.) And the Fed has been lowering rates on a consistant basis for about 6 months. This may account for the 4 month uptrend.
Inflation is the result of an increase in the money supply and little or no growth. Well, growth has slowed down to a crawl. And the money supply has increased. One way to increase the money supply is to lower interest rates on new loans. And if you keep increasing the money supply this will bring about inflation. The opposite can also be true. About a month ago the Fed began sending signals that I was likely to not reduce loan interest rates any more in the near future and may even raise them. The market seems to have reacted the way one would have expected. If the Fed starts raising rates and keeps raising rates this could drive the stock market lower.
I am bearish on the market. I pulled up charts for both the DOW and the S&P 500 along with some indicators. Along with some of the same indicators that marketdrop used and I have a different interpetation. Perhaps he pulled up an ETF that shorts the market. The Momentum Index is in bearish territory. But it has been heading higher in the last week. However, the price overall in the last week has been heading lower. That's a confliction. And this happens quite often which is why I no longer use this indicator. It's just not that reliable. At least for me. The Relative Strength Index (RSI) is neither overbought or oversold, it is in the middle area of the chart. But if you use a trendline you will notice that the RSI is trending lower. This is a bear sign as long as it's not oversold. The 200 day Moving Average is trending lower. A bear sign. In the last month the 50 day MA has gone from trending up to flat in the case of the S&P 500, and in the case of the DOW has made a dip down. Possible bear signals. A month ago when the MACD indicator was in fairly deep bullish territory and the fast line crossed below the slow line, this is a bearish indication. And about a week ago to several days ago both lines crossed below the 0 line on the chart. This is a strong bearish signal. A simple trendline on the price chart will tell you that the trend has been down over the last month. This would be a very strong bear signal. All these indicators do lag a bit. A couple indicators that are more likely to show what's happening more recent is the Williams%R and the Slow Stochastics. Both of these indicators are showing an oversold reading which is a short term bullish signal. But to go long now you would be trading against the trend. Which you should not do, because it is considered a more riskier trade. You should always trade with the trend. So, wait until the price goes up (which it looks as if it may have started to do) and hits an area of resistance. Then when it starts going back down short it. This way you will be trading with the trend. And getting in at a price that gives you better odds of success.
