More Thesis Bits and Some Observations

Investors are dependent on stimulus.

…Stimulus that can’t be sustain without causing rising yields or a currency crisis, both of which would undermine any recovery.

Inflation is indeed occurring, in the commodities markets, in the asset markets, in the equity markets and even in the affluent art world, but not where it matters most, the real economy.

Global Imbalances have not been addressed nor will they be for some time to come.  Exporting nations, depending on the US are wary of a weakening dollar and are taking steps to stem the dollar decline.  China has not done anything to lift its peg to the dollar, a sign to me that they are still primarily an exporting nation.  The US is attempting to become more export oriented in a world economy already FULL of exporters.

Some Emerging Themes

A potential political deadlock looming in 2010/2011?

Finally, some headway towards the heart of the Zombie problem….but it will affect banks’ balance sheets (problem will become more acute)

The first half of the equation seems to be bullish (job losses are receding), now we need to see signs of a pick up in hiring, not just tepid pick up, a STRONG pick up if it were to validate the valuation that the stock market currently has.  So far the data do not insinuate this.

…And Some Technical Observations
Technicals are starting to look weak again.  It seems the market is really having a hard time getting passed the 1100 area, not to mention the overhead resistance likely to be seen at the 1120 level.

VIX is showing a possible inverted Head and Shoulders
DXY is holding at the 75 levels despite numerous attempts to make a clean break below it (we now have central banks backing the dollar as they buy the currency to weaken theirs….remember, they still depend on exports.)
XLF (financials) are putting in a possible head and shoulders formation.
DJT (DJ transports) are putting in a triple top (negating the DJ theory).
S&P 500 also seems to be putting in a triple top and on higher volume downwards.
Oil and Copper haven’t really moved higher even with a weakening dollar over the last 2 weeks.

The signs are everywhere that this rally is getting long in the tooth. Is the bear waking up?  Tighter stops are warranted to protect against downside in my view.

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