Bottom line is, the market appears to be placing a lot of faith in the efficacy of the ‘Bernanke Put’ in perpetuating and maybe even amplifying the current rally. Whether this faith is misplaced is an open question, but certainly the market’s violent reaction to bad earnings news (Merrill Lynch) and a poor economic report (existing home sales) is a cause for concern. This concern is underlined by a continuing poor performance in terms of Supply and Demand, where Buying Power is now just 2 points from a new reaction low (and its lowest reading in about 8 months) and Selling Pressure is 6 points below a new recovery high. It could worth keeping in mind that, at the July market high, the Selling Pressure Index had a reading of 447 while the Buying Power Index was at 486. At the Oct. 9 market high (well above the July high), Selling Pressure was at 521, 74 points ABOVE its July level, while Buying Power was at 429, 57 points BELOW its reading at the July market high. If market strength is measured in terms of rising Demand and falling Supply, this rally continues to carry a very high degree of risk.
- Live update from my reliable sources.
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