UK Stockmarket 2009 and beyond

StevieJ wrote: »

The Baltic dry exchange often seen as predictor of markets, is it still useful? A good article pointing out that since 2003 it seems to have lost something.

http://74.205.65.105/features-and-interviews/1724-rethinking-the-baltic-dry.html

Hi SteveJ, I don't really follow the BDI closely, so I can't really make any good argument for either case. However, form a purely observational perspective I would say if it were to lead, given the composition of what it is, it is unlikely to be a very good leading indicator in times of extreme volatility, you don't put supply on the market overnight and you don't take it off overnight, I would say the BDI is a leading indicator from a base or plateau, or possibly long established steady trending economy. With an economy moving sideways over a period of time, then the BDI could be an early indicator of the next directional move. At the end of the day it is a function of the order flow for shipping, people place the orders, and thus as an indicator it is only going to have as much foresight as the people placing the orders, so to some extent I suspect it is both leading and lagging, depending on the circumstances, which probably isn't a lot of use to most people In my experience, whatever one uses as an indicator it can never be viewed in isolation.

Hmmn...would I guarantee that we will not see the March lows again? Certainly not, any time spent studying markets shows there are no guarantees. I do think that central banks and governments will make every effort to ensure that we don't, by printing money and launching stimulus packages should we head that way, at best that may prevent new lows in nominal terms, but I fail to see how you can borrow your way out of a debt crisis, it kind of flies in the face of all conventional wisdom. "I have a major debt problem........solution,....borrow more!" Yeah, ok, good luck with that.

Imho we are in a cyclical bull market which is reaching it's peak, within a much larger secular bear market. We have seen a spate of less bad economic numbers, as optimists, and bulls point to, this is what the first signs of a recovery look like. I get that, and agree, it is indeed what the first signs of a recovery look like, unfortunately it's also a condition apparent within the midst of bear markets, things can't descend in freefall forever, panic leads to exaggerated inventory liquidation, conditions get ahead of the cycle and there are bounces, attempts at recovery.

I have no more idea where the markets are headed than anyone else, that said here are my observations and thoughts for whatever they are worth.
On Friday the S&P500 tagged new multi month intraday highs at 1039.47, a mere 9 points shy off the 1048 target I posted a few weeks back, a 54% rise off the bottom. At this level, guesstimation (which is all forecasting really is) with any great confidence becomes much more difficult. Optimism is returning, Wall St. has pronounced the "crisis is over" and economists are heralding the end of the recession. Sentiment indicators have risen quite sharply through August, and according to Investors Intelligence, the percentage of bears dipped below 20% as of Tuesday taking the Bull / Bear ratio to 2.60 (the 2.00 level is considered extreme bullish whilst the 0.60 level is considered extreme bearish) One worrying statistic for the bull case I came across recently, fitting in with low volume concerns, is that according to the WSJ since Aug 5th, 31.5% of the total NYSE daily trading volume was accounted for by just 5 stocks, Citigroup, Bank Of America, AIG, Fannie Mae, and Freddie Mac.

All that said, the rally is tired, indicators whilst less overbought than recently are now diverging, however, Bloomberg, and a number of media articles have been warning of September, historically the worst month of the year for stocks. That might just be enough to give the juice for one last push, a pullback from here into the 980 area between now and Sept 7th would bring a lot of shorts to the market which would allow the returning funds to enter at a better price and set the stage for one final push to an endpoint in the 1100 - 1120 area into early October. From there I'd expect the bear to return from his hibernation.

As I say, that's just guesstimation, will be interesting to see how it really plays out.

Recently some posters on this thread were discussing the viability of a trade on US Natural gas market, and ETF's were mentioned as a possible vehicle for that, at the time I pointed out a few risks associated with such a trade imo. I just came across this article which may better explain the associated risks than I can.
http://stocks.investopedia.com/stock-analysis/2009/Natural-Gas-Implosion-UNG-GAZ0827.aspx?partner=SWW8