It is not an indicator of a coming recovery but rather the end of a recovery when junk stocks are so high in price that they can be used to buy out sound companies just like when AOL bought up Time Warner right before the Tech-Stock bubble meltdown in 2000.
To cool off its IPO market, China has now stopped granting new licenses to many new untested institutions so they cannot bid alongside other financial counterparts for initial public offerings.
Market forces September 22
Light crude oil dropped below $70 a barrel again as gold slid to $1005/oz. The $US is still weak at $1.47 per Euro.
The FED has been buying US Treasuries to depress the interest expense and compensate for the decline in foreign purchases. When the FED does that the treasury must print the money and that will eventually weaken the dollar and become inflationary.
Market Outlook
Worldwide credit remains tight due to de-leveraging of banks. Free world consumer demand continues to decline. The Federal Open Market Committee's (FOMC) decision on interest rates is due out Wednesday. Markets will be looking for inevitable evidence that the Fed is about to wind down on its unconventional financial stimulus measures given the recent optimism of Bernanche.
Asian markets were mixed last night; China down -2.3%, Hong Kong up 1.1%, Japan markets closed, and India up 0.9%. Indian inflation has returned
European markets are up from 0.9% to -1.3% this morning about half way through their day.
US market futures are down -0.6% at 7:00 AM EST before the opening. The Federal Reserve starts its two-day monetary policy meeting today, and economists expect the FOMC to hold the target range for overnight interest rates low at zero to 0.25 percent.
We are very cautious now in anticipation of a sudden correction at any time. The percentage of bullish investment advisors now rivals that seen at the 2007 market peak.
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