Republican leaders may be worried about the Federal Reserve's second round of quantitative easing, but the stock and credit markets are delighted: They've improved significantly since the plan was announced. But can the rally be solely attributed to QE2?
With analysts expecting the stock market to rally, investors are feeling bullish. But are they too bullish? High investor confidence has often signaled a market turn for the worse in the past. Other indicators also show cause for caution.
Financial markets are becoming increasingly schizophrenic, ruled by erratic ups and downs. It's at times like these when technical analysis can help investors manage the emotional roller coaster, which is why for chart watchers, the catchphrase of the next few months could be "mind the gaps."
For a host of reasons, when the dollar spikes, stocks drop, and when the dollar falls, stocks soar. Right now, with dollar sentiment reaching maximum bearishness, contrarians are preparing for the next shift. If the dollar rises again, stocks could reverse.
The far-sighted ones are looking beyond the election and Fed and seeing a robust global manufacturing rebound and impressive corporate earnings. These strong fundamentals are finally overcoming risk aversion -- and could set the stage for an equity rally.
Investor sentiment is a remarkably accurate contrarian indicator: When investors become exuberantly bullish, the market is nearing a high, and when investors are strongly bearish, market lows are a good bet. Be warned: Right now, the charts show the sort of optimism that precedes a fall.
Investing is a jungle, and most of the so-called experts who get quoted in the media are on the prowl with a simple purpose -- to give you a reason to trade. But they don't know much more than you do, and all their arguments ignore a basic reality: The market is now controlled by short-term traders.
If you're tired of watching your stocks go up and down without making any firm gains, consider a contrarian investment strategy. It's riskier, but the payoff can be big. Contrarian fund manager Don Hodges offers three stock picks for 2011.
It's no secret that stock investors have suffered through roller-coaster volatility this year for little or no return, while bond investors have been having a ball. The longest-dated Treasury mutual funds have returned nearly 20%. Stocks, meanwhile, have done zilch.
Although the market naysayers will talk down early September's upside rush as just another bear market rally, investors shouldn't doubt the sustainability of what now appears to be the next upswing of a bull market.
Big money managers can change their strategy at any time. But for individual investors -- who are betting their own money -- the decision to be bearish or bullish is much tougher. Here's the key question: What lets you sleep at night?
The Dow closed Friday at 10,424.62, within an eyelash of where it began the 2010 trading year, after a furious March and April rally that took it to just over 11,205, and a fear-driven bull that pushed it back down again to just under 9,700.
A further 18% overall profit increase this year, in an economy facing numerous challenges both domestically and overseas? Don't count on it.
What to do when investors everywhere are in a panic? Legendary investor John Templeton had this advice: "Buy only what is being thrown away." That's advice worth heeding today.
So is this, finally, the beginning of the Big One -- the major market reversal that the bears have been pining for? Their argument is surely gaining steam. But the bulls have their own solid case, and it's worth considering in these volatile times.
At the beginning of a bull market, it's often the most speculative stocks that perform the best and that has been the case over the past year. Now, investment advisor Richard Moroney says its time for investors to shift their focus to higher quality large caps.
