By MoneyMorning.com.au
Who would have thought the ASX 200 could be up nearly 9% in three days. I thought markets were supposed to go up by the stairs and down by the elevator. Instead we are seeing reverse crashes.
I am sure that a great bulk of the buying over the last few days has been short covering, but I also suspect there are people trying to pick a bottom.
Perhaps we have seen the low for the next few weeks or months, but I have a feeling we are going to see lower prices before you could call the low of the bear market.
The task at the moment is to survive the volatility.
After six months of the market selling off it’s natural for the market to bounce. Whenever any trade gets overcrowded the market will always manage to shake the weak hands out. The bearish sentiment over the last few weeks had reached an extreme point and the vicious rally will have meted out some punishment to any stubborn bears.
But if you look at the underlying macro-economic situation, nothing has really changed. All we have seen is more posturing by those in power to convince the market that all is well.
The Bank of England has started printing again and the US Federal Reserve is thinking about more money printing in the United States.
It feels like the central banks are taking turns in printing. Maybe the European Central Bank is next.
The world’s economy is still struggling to keep its head above water and none of the policy actions are aimed at actually fixing this situation. It’s all about supporting and protecting the banks. We are now at a point where the banking system is a parasite sucking the life out of the economy rather than the facilitator of growth.
The irrational fear of prices falling has politicians scared to death. They are willing to throw unlimited amounts of other people’s money at the problem to stave off the markets attempt to return to equilibrium. The unravelling of 30 years of credit creation can’t be swept under the carpet.
But the illusion created by printing money is too alluring. They will continue to take, what to them is, the easy path…
Until it blows up in their face!
Murray
PS. Want more market analysis? Check out Murray’s YouTube channel. Each week, Murray adds a free video, full of detailed analysis of what’s happening in the markets. You can click here to watch his latest analysis and subscribe to Murray’s YouTube channel to receive instant notice when his next video is available.
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From the Archives…
What Debt Crisis?
2011-10-07 – Greg Canavan
Enjoy the Rally, It Won’t Last for Long
2011-10-06 – Greg Canavan
Why the Fed’s Actions Make Perfect Sense
2011-10-05 – Murray Dawes
Too Big to Bail
2011-10-04 – Murray Dawes
What Can We Expect Next From Commodities?
2011-10-03 – Dr. Alex Cowie
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