Wednesday, December 07, 2011

Market indecisiveness may continue

The market continues to struggle with the question of whether the recent rally is ready for "the next leg up" or has "run out of steam" and is getting ready to "roll over" and trade back down in its trading range. Flip a coin, literally. The latest rumors out of Europe are simply background noise and at best merely "excuses" for traders and short-term speculators to justify their attempts to manipulate the market. Ultimately, it depends on "real investment" money flows; even if the recent rally was due to substantial inflows of "real investment" money, the open question is whether such money will continue to flow into the market or not. And those potential flows depend critically on what outlook investors are betting on for 2012.
As has been usual lately, the equal probability outcomes for the market are: 1) weakness and indecisiveness all day long, with no big change, 2) a modest rally that turns into a "sell into any rally" decline, possibly quite steep, and 3) weakness or a mini-correction that turns into a short-squeeze and a healthy gain for the day.


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