The markets are quiet overnight due to the lack of major news events.The media is talking about the strong move in the stock market and asking anyone who will listen if this is the bottom while still reporting a huge amount of new foreclosures, lower retail sales and falling business inventories. Just last week the government reported a massive amount of additional job losses. For years we’ve been told the housing market triggered the top in the stock market so I cannot see any reason why anyone would call this a bottom until housing begins to show some improvement.

 

The current rally is a trader’s rally. In other words, professional traders, money managers and private funds are driving this market higher based on technical indicators. The public or small trader is not participating. The fundamentals have not changed. Professionals are going to do what they do best, generate profits in the short-run. The long-term is dead so selling will begin again once the professional stops buying.

Public traders and professionals have different objectives. The public trader has been led to believe that buy and hold is the best strategy while professional traders look for quick, volatile moves. The return that the market has seen the past few days will be too good to pass up for the professional trader, but I fear the individual investors is going to buy near the top of this swing. Somewhere, somehow he will become convinced that he is missing out and more than likely he will buy it from the professional who will be selling to him.

I don’t believe in rallies that start without a support base. Even the great rally from 2002 to 2007 started with a huge base that began in July 2002 and extended until the war started in March 2003. I firmly believe that the height of the market is determined by the length of the base, and this current market has not built a support base at all.

Financials: Strong demand pushes yields down. China comments pressure bonds.

Stock Indices: Equity markets could see continuation rally today. Will traders book profits before the week-end?

Currencies: Swiss National Bank may not be done influencing market.

Energies: Traders buying ahead of OPEC meeting this weekend.

Metals: Swiss intervention triggers rally in gold and silver.

Grains: Corn could benefit from renewed demand for ethanol.

Softs: Weaker Dollar triggers demand rally in cocoa and coffee.