Again, are we out of the bear market? Read comments!

(Posted Saturday, 6pm)

Let’s make this post a two way street. How about the audience providing some feedback on why you’re still skeptical about the recent rally and that we are still in a bear market?

The discussion is a two way communication. I am not here to prove who is right or wrong. The obvious judge will be time.

I’ll start of by presenting my opinion on why we are out of the bear market territory.

1. Let’s use the DJIA for discussion. Since October 4^th, the market has tested the 12,200 resistance level four times. Despite the Europe sovereign debt concerns, the support lows should be getting lower with increase concerns in Europe, right? But the (support) lows are getting higher with support level at 10,400 and 11,250.

2. Are you familiar with the Relative Strength Index (RSI) on DJIA? Did you notice what happened when the index breached 30 (the oversold level) on Nov 25^th? The US market (coincidentally) rallied on news of better Black Friday sales. I could be wrong but I don’t recall any financial provider discussing the DJIA being on the oversold index level!

3. The economic data from US, the world largest economy is generally better than expected lessening fears of a double dip recession. The latest being the unemployment rate dipping to 8.6% matching the lowest since March 2009 from 9%.

4. Emerging markets like Brazil, China, Indonesia and Thailand had lowered interest rates in their monthly Monetary Policy Meeting (MPM). This indicate that they are sending a clear message their support for global growth vs their fight again inflation. The lowering of interest rates makes borrowing cost lower thereby promoting growth!

5.Similarly, China, which is the world’s second largest economy, had lowered 50 basis point in their RRR; making borrowing cost lower in China. This is their pledge to support growth instead of fighting inflation.

6. The CBOE VIX (with a low high range of 25 - 45) has been at the 27-28 level for the last 2-3 days indicating speculator’s sentiment on lower volatility.

7. As you probably know that hopes and speculation move the market, the French, Italy and Spain bonds are yielding much lower than the unsustainable 7% level. Global investors are hoping of a favorable outcome of the EU summit on December 9^th.

8. Expect the unexpected.

The big surprise (last week) was the coordination of Central Bank actions to reduce the interest rate on dollar liquidity swap lines by 50 basis points.

9. More talk on the ECB/IMF channel to fight the European debt crisis primarily in Italy and Spain. In addition, tougher enforcement of budget rules by Germany and France to manage the Europe debt crisis in its 3^rd year.

I had post more than 8 points. Is this sufficient? How about some feedback through some comments?

Again are we out of the bear market? 

Next important data:

Watch out for Australia’s and Europe next MPM this coming Tuesday and Thursday. A widely expected 25 basis point cut would further support global growth. The initial knee jerk reaction is for the Aussie/Euro to drop 30 pips upon receiving the news. Otherwise, the Aussie/Euro would strengthen.

Response on comments by audience:

If you know me by now, I am the professional who never recommends what to buy or sell. However, I am the ears and eyes to inform the audience what is happening in the market (before the headlines!).

Why prices go up or why prices go down? I believe that without understand the price movement, the real reason why prices move, I will NOT be able to understand if prices proceed in the same trend or will it reverse.

As you also probably know by now, I have my basic indicators where I gather the sentiment of global investors and place it on the table for your decision making. I can’t recommend mainly because the audience have different

·         Time horizon; short, medium or long term

·         Investment objectives; shorten your mortgage, down payment for a property, build up your retirement fund, etc

·         Risk profile; static and dynamic, etc

As one comment from the audience asked, ‘should be buy now?’ without knowing your specific investment objectives, risk profiling, time horizon, etc I am just foolishly giving prescription without proper diagnosis. Hence,

Dear audience,

Please contact me if you have a specific question. Providing some background information would be helpful in my response.

Some grave mistakes if my (blind) recommendation were to go ahead and buy:

Buying a call option vs a put option.

Buying Eurusd vs Usdcad

Buying Audusd vs Gbpusd

Buying Jpyusd vs Us dollar index

Need I explain further?