Darshan's Blog

Darshan's Daily Market Ponderings

Wednesday 30th December, 2009

The Markets Are Levitating Like a David Blaine Tribute Act

Hello all!

Hope you've all had a great Festive period with your loved ones. Although there is not much going on in the markets (and I don't think there will be until Monday now), I felt I should put up my thoughts for the end of the month. One things for sure though - Santa has not really wowed anyone this year. He still has until Monday or Tuesday though.I had hoped that they would take this down to test the November Dubai futures spike but it seem, even though we have been close, we haven't quite hit those levels during any cash sessions. It now seems like the funds are hell bent on keeping the Dow above 10500 to close out the year and for tax purposes they will sell in January. This should provide some nice headlines for next year and encourage those January investors to plough their money right into a trap.

Why do I say this? Well, originally the plan was for some profit-taking to kick in and therefore provide a lower starting base for 2010. Once this base kicked in, the idea was for us to approach a top at 10550-600 on the Dow, 1140-50 on the SPX and 5500 on the FTSE 100. However, with the low volume holiday trading sessions - things literally have not moved. Even when they do move, it's in the middle of the night and the action is over by the time the market open. This of course means that we are going into the new year very close to the highs. Additionally, every Tom, Dick and Harry thinks that these markets are now going to shoot into orbit. Why? Well the Nasdaq is now near 2008 highs. That in itself says it all - we've been through some severe deleveraging since the collapse of Lehmans and yet, here we are just over a year later - and one of the world's leading markets has recovered all the losses from the past two years. What a load of complacent nonsense.

I'll tell you why it's complacent nonsense - well while the Nasdaq is doing it's own merry tech related jig - the Dow is lagging by quite a margin. It's not only lagging but it's now levitating like a David Blaine tribute act. The professionals are bailing out of it, as the money flow indicator is now trending down. Perhaps they know that if anything, what we will now have is a dangerous January - much like it was in 2008. To begin the year, I can see the new cash inflows kicking the market up a tad and that should be enough for the pros to distribute into. There are not only negative divergences showing up on all the indices but there are also a number of gaps to close below all the way to the March lows.

All in all, there is no value in this market at the moment. Yes we are in an uptrend but it's a weird uptrend that can only move sideways for almost two months. For no, even if there is the chance that the market will be kept levitating to close out on the year's high, there is ever present downside danger - so maybe there will be a double bluff and they could easily sell today and tomorrow. If they stick to the script, then they will begin to let this all go in January. You be the judge but I think we're approaching a top of sorts next month. It may not be the ultimate top but nevertheless we should get a meaningful correction of at least 10%. We will have to play it by ear but next year - a mere few days away - is going to provide many amazing opportunities to increase your capital.

Tomorrow I will be compiling my list of 10 things to look for in 2010. It won't be an easy year but it will certainly be an exciting one.

So until then, enjoy your last few days of 2009 and keep your mind fresh for 2010.

Darshan

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