Hello traders everywhere! Adam Hewison here, President of INO.com and Co-creator of MarketClub, with your mid-day market update for Thursday, the 11th of April.
Adapt or Die - That is the Law of the Market
As a trader, you must learn to adapt to changing conditions in the market, otherwise you are not going to be successful. The current rally in the DOW (DJI) and the S&P 500 (SP500) is a case in point. Maybe the fundamentals are not there to support the kind of valuations we are seeing, but that is not the most important element to consider when you look at the markets. If you were only looking at the fundamentals, you would have missed this entire move to the upside. The trend, sentiment and perception of what the market is going to do is very important, and right now for better or worse, the market is heading higher. Markets tend to trend in the direction of least resistance and right now that trend is on the upside.
There also appears to be a complete disconnect between Washington, Wall Street and Main Street. The feedback from Main Street, which is still underwater, is not that good and I think everyone would agree Washington is totally dysfunctional. Wall Street appears to be in its own universe, ruled by Chairman Bernanke and supported by the Fed, to the tune of $85 billion every month. Providing the Fed fix continues, we are likely to see the market continue its upward trend.
The S&P 500 and the NASDAQ
We are getting very close to some big numbers in the market. $1,600 on the S&P and $15,000 on the DOW will be difficult psychologically for the market to overcome. I expect those two levels will act as the next level of resistance for both of these indices.
The trend for the Nikkei is positive and I expect this market to continue moving higher. The opposite goes for the Yen, as I expect this currency to trend lower against the other major currencies. There is no free lunch in the financial markets, Japan has embarked on a risky and very aggressive QE program, similar to the one the Fed is using here in the US. Only time will tell if this strategy is going to be successful or disastrous.
This from MSN this morning: "As North Korea readies what is thought to be a missile test, China's Foreign Ministry spokesman, Hong Lei, has spent most of the week deflecting questions with the official line that "all sides" should show restraint and begin dialogue, and that peace and stability are a "shared responsibility." But in an interview with NBC News, he was more forthright about China's growing concern: "We do not want to see chaos and conflict on China's doorstep," he said.
German Chancellor, Angela Merkel, stated this morning that Germany is absolutely committed to the Euro. We will have to see how that plays out in the future, but the Euro has gained strength in the last several days on short covering. However, the longer-term trend in the Euro remains negative. Other countries in Europe, namely Portugal and Ireland, are waiting for a decision by European finance ministers as early as this week or next, to give them more time for their repayment schedule to smooth the way out of the current debt crisis in both countries.
Potential Chaos Ahead
North Korea - ticking down towards ...
Japan - Kuroda is the king risk
Europe - Portugal and Ireland - economic risk
The Fed - Hints QE is coming to an end
May 19th – Debt ceiling suspension expire
Have a great trading day,
Adam appears frequently on the following financial news channels as a guest expert. Click on any cable logo to watch Adam's latest appearance.