So the question now begs — where do the markets go from here? Is this a bullish sign? Our view is to expect continued volatility with higher prices to come, and ultimately a continuation of this bull market which began back in As we move through the markets day by day, we can easily forget the bigger picture and not be astute to what may really be taking place. In any event, as a firm we are always thinking what specific fundamental shift would need to occur for this to happen? We recently dispelled the myth of a potential Grexit in our last article here.
A Greek exit may indeed spell disaster for global markets but this is not in the best interest of capital markets and the ECB knows this and therefore will do everything in their power to prevent such an event from occurring. We also know that as of March this year, the ECB began its bond-buying Quantitative Easing program aimed at boosting inflation and stimulating the economy. Europe has finally decided to follow in the footsteps of the US, Britain and Japan.
Knowing when the these central banks are around can be crucial for anyone exposed to these markets, particularly in the short term. Markets are forward looking and act as a discounting mechanism, and we believe the recent volatility is the result of a rate hike being priced in later this year.
Make a trading decision or decipher the news at hand. To do this we will look at a purely mathematical view. Keen traders will note the high of that occurred in May rallied strongly from the final low in March of In this instance- the March low of multiplied by 2 doubled gives us Whilst the final high did overshoot to , we began to see strong selling at this level in February prior to the May high Chart 2.
We can also see the March high of After the Feb high at This phenomenon occurs in many markets over and over again, and is something all traders and investors alike should consider very very carefully. In taking an objective stance we must also consider what a move to the downside would look like. Historically, this would be against the norm as we have yet to see a doubling in price above the previous and highs as seen in Chart 2.
By doing this we can better understand what form of downside pressure exists in the market relative to previous moves, and whether these moves down are gaining strength and momentum. Through careful examination of these moves, we can see orderly corrective moves of similar magnitudes.
This shows that every time the market has sold off over the past year or two buyers have stepped in very quickly, with the market rebounding straight back up as all dips are bought. In our view this is very bullish behaviour. But if we look to history and consider some simple statistics, the odds favour a much greater move to the upside before this bull market is truly over. We have seen bears shorting this market and pundits calling for a top all throughout the year. If this bull market is indeed over, the real question we must ask is this:.
All time Highs of Very interesting perspective and a pretty big call for an extended bull market. I think this is the end but there are valid reasons here having me question otherwise. Hi James, from a mathematical point it makes no real sense to correct from current levels.
From a fundamental perspective we need to look at the BIG picture removing all the hype from the media what is best for the world? Look at it this way another example if the US did not extend the fiscal cliff the world we live in now would not exist, the grass is not always greener on the other side.
What does this mean for the Australian stock market? There has been much weakness as of late. You guys really give us great reads all your articles are fantastic, wish there were more. Thanks for the kind words Prakash. The simple answer to your question is Yes. If Greece leaves the Euro region which I believe is real possibility, we would be at a top now and could easily head back down.
Markets look top heavy and it seems the sellers are much stronger than buyers. Naturally I am a bear but what if the US raises interest rates aggressively? Wouldnt this mean a correction for the stockmarket? If we factor in the never ending debt bubble all over the world except for China this could create a disastrous event.
People are also still remember the two wealth destruction periods in the same decade, the tech bubble and global financial crisis. Leave this field empty. James June 5, at Trade View June 5, at 5: Prakash June 5, at Mark June 9, at 9: Is there enough confidence in markets now that we wont see another crisis unfold? Leave a Reply Cancel reply. Trading leveraged products carries significant risks and is not suitable for all investors.
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