Well, I’m on holiday for a week or so, as are many others. But the world doesn’t stop, and some of the better blogs/news/sources are not on holiday … thank goodness. Exchanges are mostly open (day off here and there, and FX doesn’t sleep (much)).
So, what’s going on?
Sentiment just gets more and more extreme. Bullish extreme. Does that mean SELL NOW? Not necessarily, but when the sentiment measurements get this extreme it is time to be extremely careful and place more weight on potentially bearish developments. BTW, when I say bearish, I don’t mean ‘end of the world/ S&P back to & below 666/ DOW to 1,000!’ bearishness, that sort of rubbish is best left to the idiocracy …. no, but what about a 50 or 80 point fall in the S&P? Good move, nice profits if you can catch some of it. Mind you, maybe the indices just go sideways, ‘correction in time’, not necessarily price?
So, what’s going on then?
The benchmark one-year lending rate was hiked 25 bases points to 5.81%, and the one year deposit rate jumped by 25 basis points to 2.75%.
From Business Insider, the headline:
China just raised interest rates again. http://www.businessinsider.com/merry-christmas-china-just-raised-rates-2010-12?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
Two weeks ago we thought we were seeing some truly extreme bullish sentiment with the bull ratio reaching 70%. But the current numbers make that pales in comparison.
More great work from tradersnarrative http://tradersnarrative.wordpress.com/2010/12/24/sentiment-overview-week-of-december-24th-2010/
Bullish Sentiment Reaches Historical Extremes
To paraphrase (/invert) a comment on this blog a few months ago, if the S&P keeps going straight up from here a lot of people are going to make a lot of money.
I also pointed out a comment from Barry Ritzholtz recently that, again to paraphrase, there were strong bids under the US equity markets, so the task is to assess whether that is still the case, and also to be aware of any distribution-type price/volume activity that may occur.
I wont be doing that until Jan. 4, though.
Worth checking out developments in the US economy, too.
The Pragmatic Capitalist has this:
The AAR reported another week of growth in rail traffic for the week ending December 18th, however, there were signs that the broad strength we’ve seen lately has begun to moderate some.