The lows of the broader market indices held again. The S&P closed 5% above its November low and the NASDAQ closed 11% above its November low. The moral hazard is about to be punished by the FBI.
The stock market behavior appears set to support a major advance not just another bounce. The NYSE, S&P, NASDAQ, and QQQQ all held above their November lows. The market will gain confidence as the moral hazard is dissembled and removed from the world financial system.
The DJI's low in November was not a full capitulation because investors were fleeing to the Blue Chip stocks under the mistaken belief that they represented quality. Jim Cramer, the Money crowd, and others were pushing favorite portfolio picks from the Blue Chips then. But more recently investors discovered that the dumbest and most corrupt executives were in the big trusted companies reaping the obscene bonuses like Bernie Madoff and Allen Stanford.
In fact the whole Financial Crisis is the consequence of a Subprime Mortgage Ponzi Scheme that required the debt demand of people who wanted to buy a house. The corrupt mortgage lenders had to gradually drop borrower acceptance standards because they could not get enough mortgages to fill the demand for the high interest junk mortgage derivatives that the banks were selling. Ultimately some investors, Goldman Sachs, and hedge fund managers suspected that it was a fraud and began betting against the Ponzi scheme.
We have finally reached the stage when that moral hazard is about to be taken down by the FBI. The FBI says more than 500 companies were involved. This purge and punishment stage is necessary for confidence to be restored to banks and the world financial system. This punishment of the morally obscene and stupid executives who caused the crisis and thought Americans were dumb enough (like G. "W" Bush) to not go after them… is the final requirement for a full market recovery.
China bottomed at the end of December and is now up 27%. Last night Asian markets were mixed with China up 1.6%, India down 2.2% and Japan down 1.9%.
At this moment most European markets are down about 3 % on average.
The US market futures indicate a negative opening this morning but still only the DJI is below the November low at the opening for the reason we explained above… that people in November fled to the DJI on the mistaken belief they were of better quality. Yesterday the S&P closed 5% above its November low and the NASDAQ closed 11% above its November low.
Options expirations will help the market that is ready to advance after several successful tests of the market's recent lows. There is 30% to 40% headroom for this market to rally before hitting an upside resistance level.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment