Thursday, September 24, 2009

How extended is this rally?

Guambat is now becoming known as Poppa Guambat, what with the arrival of granddaughter Cherry Blossom/Tinker Bella/The Baby.

Poppa Guambat is charmed by that standard child charade, "how big is (whoever the kid is)?", asked in proudish stage voice by some old person, to be followed by the kid throwing hands high up in the air over his/her head, with proud parents/grandparents/uncles/assorted other old person, all stupidly exaggerating, "Soooooooo Bigggg!". It's insipidly charming and irresistible and too often repeatable.

Guambat was reminded of that when reading a link to the FT Alphaville post today, This bank-engineered equity rally. See this post in the Stew, also.

The linked cite was to Just who is buying this rally?

In that cite is a quote that answers the question, "how big is this rally?":
The market is so overextended that it is now 20% above its 200-day moving average, which is a technical condition that has not occurred in 27 years.

A Bear Market Lurks as Dow Nears 10000
All previous rallies of this magnitude took place in the 1930s and the 1970s, according to Ned Davis Research. Those were periods of turbulence for both the economy and the markets, and none of the gains was sustained.

"We are saying, sure, you can get in, but don't fall asleep at the wheel, you have to get out, too. If you are looking to put money in and then not look at it for a year, you are taking a big chance."

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