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Everywhere You Turn, Bulls Galore



September 21, 2010 – Comments (1)

From the President, down to the retail investor, the bulls are back in full force. Just three weeks ago, many were ready to jump out the window claiming the double dip recession was in play, things were as bad as they could be and there was no end in sight. Truly amazing, the switch that has ocurred.

The markets are trading flat to slightly lower after a 10% rally in September so far. The SPDR S&P 500 ETF (NYSE:SPY) is lower by $0.30 to $113.90 (-0.26%). The market is unlikely to make any major moves prior to the Federal Reserve announcement on interest rates at 2:15pm ET. Volume has remained light as well prior.  The dollar is weaker again today, inching lower. With the economy looking stronger, it is unlikely the Federal Reserve will do anything but continue to ease using quantitative easing methods. They will not tighten. Knowing that, the dollar should continue to remain weak as we are seeing it.  The PowerShares DB US Dollar Index Bullish (NYSE:UUP) sits at $23.47, -0.10 (-0.42%).

As bullish sentiment increases, retail money starts flowing back in the markets. With the S&P 500 up 10% for the month, is this a fake rally or one that will continue for months to come.

Gareth Soloway
Chief Market Strategist

1 Comments – Post Your Own

#1) On September 21, 2010 at 12:49 PM, davejh23 (< 20) wrote:

"With the S&P 500 up 10% for the month, is this a fake rally or one that will continue for months to come."

It's difficult to tell...this isn't the first extreme swing in sentiment over the last few months.  Pessimism was extreme in early July and the market rallied.  Optimism reached extremes in early August and stocks fell.  As you mentioned, pessimism peaked a few weaks ago and stocks have rallied.  Do bullish extremes signal a reversal here or will stocks actually break out this time?  Weakness here will likely send stocks back to the low end of the recent trading range...that's still my best guess (only a guess).  If stocks continue to push higher this week, I'd probably change my guess...simply based on technicals...fundamentals still look too weak for market strength...

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