market commentary
This “mad rush to diversify into foreign stocks” (as the Wall Street Journal puts it in today’s paper) is, in my eyes, foolish. For one thing, you should never invest in anything if you don’t understand it completely. I find it hard to believe that an investor could master the business and political facts of several different countries. Second, the political and financial stability of emerging market countries is overstated at the moment. We tend to forget the Argentina and Russia only recently defaulted on their debts, for example, and that Dubai can’t pay its bills. Dubai was supposed to be good as gold. Yet there’s a “mad rush to diversify into foreign stocks”? Foolish nonsense. To make it more so, there is, in most informed opinions, an emerging market bubble. Evidence of this is partly the very fact that we speak of a “mad rush to diversify into foreign stocks”.
The market had a gangbuster day yesterday, with the Russel butting its head on 620 resistance. 620 was very strong resistance before, and I anticipate it will be again. Translation: it will be hard or the Russel to rise above 620. If it does not and the market drops, there will be a classic head-and-shoulders pattern staring at us on the charts, which would be very bearish. Also on a bearish note, the volume yesterday was low, which means institutional investors were not in on the rally, which suggests the rally probably won’t be sustained.
While I am not overly negative on the economic situation in the US, I am not overly positive either. I said in early January that I anticipate a rather sideways year, and I still hold that opinion.
Leave a Reply
You must be logged in to post a comment.
