Why Markets Flop Around
Various market prices are flopping around, just like the gold price. I talked about the gold price last time, but the same sort of flopping action seems to be taking place in other markets as well.
Stocks are overbought - which means that by any measure they should correct. This has been the case for weeks, but stocks are not correcting. They're drifting higher. It's like they want to correct, but "something" keeps shoving them up all the time. Some call this bull market action; others feel that the government is somehow intervening to keep prices up. Whatever the cause, stocks stay afloat in spite of all the technical indicators that tell us they shouldn't. (The traditional way to express this is simple: "The market can do anything." It's really important to understand this; you'll find it very helpful.)
Bonds are flopping too. The yield on the 30-year, after much battling, broke over 4.69% a couple of weeks ago. It "should have" signaled much higher yields. Since then, yields have inched higher, reaching 4.73%. But every time they push up, they drift back down. It's like something's standing over the bonds with a big padded hand and gently shoving the yield down each time it creeps up. Government intervention again? Well, since the government is actively buying bonds as part of it "Quantitative Easing II" program, it's certainly is government intervention. Of course, the point of QE II was to push yields down; it hasn't quite worked out that way. But in any case, bonds seem locked in a range.
The US dollar stays in "sink mode" but it doesn't really drop. It drifts lower, you hear talk of "collapse," then it drifts back up. It's pretty much flopping too. If you look at a chart, it recently broke below its 50-day moving average - then headed back up and is now almost touching the average. So it's got some padding under it. On the other hand, all the price action for the last months has taken place below the 200-day moving average - a sign of weakness. So you'd have to say there's some serious probability that the US dollar could break down at some point. It's just that it's not doing it. (Remember: the market can do anything.)
Two things we can learn:
1) All this price action seems to indicate indecisiveness. The buyers and sellers out there may be battling, or maybe they just can't really make up their minds. Traders don't seem to want to take any clear position. They go with the flow (as they typically do). There's just not much conviction to push prices one way or the other.
2) You can't use technical studies to "predict" - only to provide probabilities. That doesn't mean they're useless, as some say. They're useful to indicate what's probable, which can be a big help in making decisions on buying or selling an item. It's certainly better than guessing or hoping.
For now, we watch and wait. One of these days, the action will get hotter.
Stocks are overbought - which means that by any measure they should correct. This has been the case for weeks, but stocks are not correcting. They're drifting higher. It's like they want to correct, but "something" keeps shoving them up all the time. Some call this bull market action; others feel that the government is somehow intervening to keep prices up. Whatever the cause, stocks stay afloat in spite of all the technical indicators that tell us they shouldn't. (The traditional way to express this is simple: "The market can do anything." It's really important to understand this; you'll find it very helpful.)
Bonds are flopping too. The yield on the 30-year, after much battling, broke over 4.69% a couple of weeks ago. It "should have" signaled much higher yields. Since then, yields have inched higher, reaching 4.73%. But every time they push up, they drift back down. It's like something's standing over the bonds with a big padded hand and gently shoving the yield down each time it creeps up. Government intervention again? Well, since the government is actively buying bonds as part of it "Quantitative Easing II" program, it's certainly is government intervention. Of course, the point of QE II was to push yields down; it hasn't quite worked out that way. But in any case, bonds seem locked in a range.
The US dollar stays in "sink mode" but it doesn't really drop. It drifts lower, you hear talk of "collapse," then it drifts back up. It's pretty much flopping too. If you look at a chart, it recently broke below its 50-day moving average - then headed back up and is now almost touching the average. So it's got some padding under it. On the other hand, all the price action for the last months has taken place below the 200-day moving average - a sign of weakness. So you'd have to say there's some serious probability that the US dollar could break down at some point. It's just that it's not doing it. (Remember: the market can do anything.)
Two things we can learn:
1) All this price action seems to indicate indecisiveness. The buyers and sellers out there may be battling, or maybe they just can't really make up their minds. Traders don't seem to want to take any clear position. They go with the flow (as they typically do). There's just not much conviction to push prices one way or the other.
2) You can't use technical studies to "predict" - only to provide probabilities. That doesn't mean they're useless, as some say. They're useful to indicate what's probable, which can be a big help in making decisions on buying or selling an item. It's certainly better than guessing or hoping.
For now, we watch and wait. One of these days, the action will get hotter.
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