Friday, February 7, 2014

DOW Breaks 200 Day Moving Average

SEE HERE  There are two major schools of investment strategy: 1) the Fundamentalists who evaluate stocks based on fundamentals like earnings, capitalization, cash flow, and the like, and 2) the Technical Analysts who depend on the theory that the market is efficient and so all the information is already in the prices and volume of trades on the market.  MORE

One technical factor is the idea that stocks trade in market trends depending in part on the enthusiasm the investors have for the market.  This gets reflected in the ideas of Bull and Bear markets.  The Bulls are those optimistic about the market and the Bears are those who are pessimistic about the market.  The market tends to trade in trends depending on the relative number of bulls and bears in the market.  Upward trends are bull markets while downward trends are bear markets.

Stocks commonly trade above or below the general trend.  When they rise more than expected or fall more than expected the Technical Analysts see this as signaling a change in trend.  We've been in a bullish phase for a while which is hard to justify on the basis of the wildly out of control monetary policy that is expanding debt and credit.  So this Bear signal breaking the 200 day trend on the downside may signal a market top.  Of course as with all such 'signals' their meaningfulness will tend to depend on the opinions of investors. 

So is the end approaching.  Here's on analyst who says YES while my Schwab report that came in today was talking about "deflation" but using what I sense in a naive definition of deflation.  They're starting to call downward markets "deflation" since afterall you money buys more when the market goes down.  The problem with that idea is that there are lots of reasons for markets to go down beside the rather odd idea that the money is getting to be worth more.  My visits to the Super Market have not been showing bacon going down.

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