Articles
-
Don't Be Fooled By This So-Called Good News
BEAR MARKET rallies are a fascinating stock market phenomenon to behold. They’re sneaky, deceptive, and utterly believable, writes Greg Canavan for the Daily Reckoning Australia.
Those on the sidelines watch with regret as markets slowly move up. One by one, they get sucked in to ‘participating’ in the rally. The bulls – we mean the ones who think it’s always a good time to buy – talk about the market climbing a ‘wall of worry’ as they celebrate another leg-up and the apparent dawn of a new bull market.
Why do we think this is a bear market rally? We’ll get to that in a moment. First, let’s take a quick look at the bear’s recent work.
Global markets finished up strongly overnight on the release of ‘strong’ global manufacturing data. The beginning of each month sees the release of manufacturing indices for a whole bunch of countries. Known as the PMI Index, the standardized indicator tells whether a country’s manufacturing sector is expanding (denoted by a reading above 50) or contracting (a reading below 50).
For the month of January some countries (China, the UK and Germany) posted better than expected results. In the US the index came in slightly below expectations. But that didn’t stop the market rallying anyway.
At a reading of 50.5, China managed to keep its manufacturing head above water in January. But unlike its Western counterparts, the Chinese market actually fell around 1 per cent! ‘Better than expected’ means less chance of a monetary boost from the central bank. The stock market wasn’t happy. It appears easy money creates easy wealth – more so than producing things.
Let’s put things into perspective. JPMorgan, who compiles and aggregates the global data, had this to say in its press release:
The global manufacturing sector continued to record below trend growth at the start of 2012. At 51.2 in January, the JPMorgan Global Manufacturing PMI™ rose to a seven month high, but remained below its long-run average (51.8).
Read full article
-
Authorized Person for MEX NEPAL
Mob: +977 9856030634 -
Biratnagar Branch Manager
Mob: +977 9852033934 -
Our Clearing Member
-
Our Banking Partners
-
-
-
