Monetary Policy Optimism Could Keep Sentiment Upbeat for 2 more years but fasten your seatbelt as we are going to expect big turbulence along the way before reaching the ultimate peak by 2015-2016
Meanwhile, enjoy the rally but mind you, no party can go on forever and you must know when to sell, even on short term basis in order to maximise your return.
The major U.S. Dow and SP rose higher on Monday, with sentiment remaining firm, as the markets relish the news of Larry Summers withdrawing his candidature for the position of the Federal Reserve Chairman.
The development is being interpreted by the markets as delaying the spectre of monetary policy tightening. Most Asian markets advanced and the European markets are also rallying despite all the global economic problems.
GDP growth is only 1-2% in major nations but stock markets keep pushing up without any meaningful correction. Stock markets are running well ahead of the economic growth. You need to remember that this entire rally is fuelled by Q.E. A time will come when stimulus measure will be completely halted.
Just look at the following charts. Wow! so easy to make money as high tides lift all the boats. Even stock markets in bankrupted countries like Spain and Italy also registered strong rise in stocks.
Spain's Madrid General Index broke resistance at 900
Germany's DAX is similarly trying to make a new high
Another problematic nation like France's CAC-40 is testing resistance or new high at 4120.
Italy's MIB Index is also testing a new high at 17700.
The FTSE 100 is facing resistance at 6600.
U.S. stocks also extended their gains in the week due to the markets reacting to some solid Chinese economic data, the mitigation of fears concerning the Syrian crisis and wishful thinking that the Fed’s taper has been factored into the price.
It seems to me that we are now in the topping process and major correction will set in soon. I am now waiting patiently to short the markets.
But, it does not mean that I will not hit and run by taking any Long positions (for aggressive traders only) if you look at the following bullish chart. Double top resistance may punch through. It is coming to interesting time. The key point is that institutions show no haste to take chips off the table. Until these changes, my view here is still positive but Leave the last 10% of gain to others.