Friday, December 29, 2006

On The Other Hand...

While my post below on the Dow throws out some additional fodder for the bears, there's also the nagging issue of global liquidity that can't be ignored and has clearly been a key driver not only for the U.S. stock market but for overseas markets, M&A, commodities, etc. On my regular reading list are the contrarian folks at the Daily Reckoning. Earlier today they examined the phenomenon of dollar demand in this age of asset class creation (Read About It Here). Of course, the DR presents not only the best case scenario, but also the doomish side of things, but their report gives great perspective on what has pushed global markets higher in general. This is why I've advocated caution and WAITING for the bullish upward channel in the S&P 500 to first be broken before jumping into broad short, or put positions against what has been an incredible stock market propelled by unprecedented capital flows and global liquidity. I think of it as a jet stream of cash that's constantly flowing from the U.S. to the Pacrim, to Europe and then back across the Atlantic to the U.S. again. Both my forex and futures trading systems are on nearly continuously from Sunday night through Friday evening as these markets hum along. There - now you've got my attempt to throw an opposing point of view into the mix. These markets don't have to crater next Wednesday. The 30 day moving average is something that I'm going to continue watch closely on the S&P and I'm thinking that sooner rather than later it will come in for some testing in the new year. Remember to read the disclaimer below. If you were planning to buy a bunch of OEX puts on Friday, don't let this post discourage you - that's between you and your professional financial advisor.

While fairly obscure services like the DR examine the issue of liquidity, along with this little blog, I think it's going to be a huge issue in 2007... there, my first 2007 prediction as well.

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