Hope and greed are also made of thin air!A healthy economy - which is not 'the stock market' - needs solid foundation . Some believe that the stock market ' is ' the economy. Some are definitely wrong! Sentiment is what the markets are about - this is not about reality.
The DJI has now been reinflated but with what?
1 - cheap printed money
2 - loads of hope and greed.
3 - implicit guarantees.
The market is still overvalued by about 15 times its fundamental value.
Tonight - the seemingly impossible happened. The market charged north zillions of points up to near 26900. It was already pretty hot for the north all day. Then when you thought there might me a minor correction south, it busted north again! No time to catch breath. By the time anybody reads this price may have shot past 27000. The alternate ABCD pattern is not predictive of anything. I use these as guides.
So what drove the last pump north between 23:00 and 23:45 GMT? I don't know for sure, but it seems that promise of some vaccine that boosts antibodies was responsible (I may be wrong).
But look at it carefully, and you don't need to be an immunologist. All you need is Google. There are other conventional treatments that can boost antibody production in the body (and I'm not going to lecture on this). Well, the folk who are pumping north are for sure not doctors or immunologists. So, they jump on any ray of hope as they would see it. This happened the other day with promise of another vaccine.
In addition there is the earnings season upon us, and the 'fat' with FED cheap money have been given the 'implicit guarantee'. Basically they can't lose. They have money to burn and you do not!
Fundamentals will always catch up. It's reality. I see myself as a realist. I'm not one for taking risks chasing the DJI north. For sure the market has left me behind. But I'm not bitter at all. Gamblers may rejoice now.
The problems arising from COVID-19 for economies are not going to be cured by a vaccine. There are a whole load of mathematical reasons for that.
The bullish punters are oblivious - in the biggest casino on earth - as to the deep-rooted problems of demand-supply shock that will not resolved soon if an effective vaccine was found this morning.
The world has been having a big party for the last 11 years. Most economies are actually built on productivity demanded by leisure, travel and entertainment industries. Think about it. Even real estate values are magnified by earnings from those industries.
Nobody has an answer to how a vaccine will cure all that has been severely damaged. Nobody may care now. But they will care when the bubble pops a second time.
This market is setting up like bad weather. And you don't know when the 'downpour' will come.
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