I have written in the past how intervention takes place in my four-step rally process, which is repeated below. This pattern has been repeated consistently since last summer's July rally.
1) Intervene in the market (done by buying futures).
2) Higher stock prices through intervention forces short covering.
3) Stock prices that lurch higher bring in momentum players.
4) If the rally lasts long enough, John Q may move money into mutual funds. This happens just about the time the rally fades.
It is clear that the current market momentum is based on factors other then economics, earnings and valuations. The reason that intervention isn’t freely admitted—as in other countries like Japan where the government is buying stocks—is because the US professes to adhere to free markets. An English statesman in the 18th century expressed it best by saying,
“The moment that government appears at market, the principle of the market is subverted.”
~ Edmund Burke ~
Scuba
Fear blind us opportunity, greed blind us the danger
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