Vanishing Fears

It’s not that the Greek debt crises disappeared over the Holiday weekend, but soothing words and lack of front page news were enough to alleviate or at least postpone fears of an imminent crisis. For the past 1-1/2 weeks, the market was headline driven and kicked around depending on the news from Europe.

No news was good news yesterday, and the major indexes, supported by a better-than-expected manufacturing index, along with a weaker dollar and a rally in commodities, did not hesitate and off to races we went.

While the rally was indeed impressive, we have to wait and see if this was a one-day wonder, or if short-term momentum has actually reversed. Major resistance for the S&P; 500 lurks around the 1,100 level, give or take a few points.

Mish at Global Economic Trends featured an interesting piece this morning, which resonated with me. It’s a lengthy article, but here is the summary titled “Something Is Brewing:”

Pressures mount as China attempts to walk a fine line between overheating and an economic bust accompanied by massive social unrest.

Elsewhere, central bankers assume the global economy is in recovery. In reality, the global economy is in another speculative binge fueled by reckless global stimulus, with China at the head of the pack.

Meanwhile, global imbalances grow with most eyes on Greece and Spain. Let’s not forget the massive property bubbles in Australia and Canada, and massive speculation in China. In the US, cities and states are on the verge of bankruptcy.

Something is brewing alright. That something is “trouble”, and not just for China.

That’s been my feeling for some time, which is why I don’t mind having a reduced exposure to the market due to some sell stops having been triggered last week. Once I can indentify that the major trend has in fact resumed, I will reconsider and add to my current positions.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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