BHBGroupTrader Weekly Market Spread Report: Issue 7 Futures Edition
What a difference only three months can make! Ever since President Obama so peculiarly took on the role of investment advisor, telling the American people in his March 6 press conference “Now is probably a good time to buy American stocks,” the equity market in the US has increased by some 40 percent. And as Robert Prechter, author of the Elliot Wave Theorist, writes in his June newsletter, “It has been breathtaking to watch the swift return to all the old false beliefs: the bull market is back; inflation is the main threat; we are running out of oil; real estate is a bargain; the US dollar is going to zero; and the economy is setting up to boom.”
If you hold any of the above beliefs, the good news is that you are not alone. The bad news, however, is that (financial markets) history has been rather unkind to those holding the consensus view.
Two examples from recent times will suffice. In March 2009, after a 23% rally off its lows, Jake Bernstein’s proprietary Daily Sentiment Index showed that investment advisors, traders and analysts were collectively 93% bullish on the US dollar. Since that time, the US dollar has fallen over 15 percent against the same basket of international currencies. Today, US dollar bulls only make up 6% of those surveyed. Less recently, in the spring 2008, as all commodities were running to all-time highs, everybody knew that inflation had been soaring since 2001, the US dollar was crashing, and it was “obvious” that the Federal Reserve was engineering a powerful inflation. That was right before commodities fell more in eight months than at any other time in modern history. [...]
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