Markets are a repeat of history. You must believe this fact to become a proficient and consistent trader. Having said this theorem, let's examine the facts of the current stock market in early April 2011. The closest parallel to the 'Big Picture" of now is the 'Big Picture' of the year 2000. Greenspan had poured liquidity into the U.S. economy at unprecedented flows. Bernanke is effectively taking the same approach except it is a Tsunami now! He will not shut off his liquidity wave anytime soon.
A Fact - stock markets who have had long extended bull runs end with a blow-off that astonishes even the old sage experienced pros. Therefore, we should see power in this market yet to come with Bernanke having a blank check of 'our' money to prod this market upward.
A Fact - stock markets who shrug off being blindsided by catastrophic events and do not decline more than 20% are the genuine bull. Recently, the earthquake in Japan should have instigated panic into a mania. Instead, the market declines less than 10% and re-established itself.
A Fact - stock markets actually rally in the early stages of inflation increases and interest rate increases. The last 12 months have seen inflation increase each quarter while the 10 and 30 year U.S. Treasuries are in a constant descent. The reason is that monies are removed from U. S. Treasuries to be placed in the stock market.
A Fact - stock markets rally as the campaigns by incumbents embrace this environment as a pat on their back for a 'perceived' job well done. The recent 2010 elections creates fear by Congress as the adage 'vote the bum out' was seen in ballot boxes. Never in the history of the U.S. politics have such short-sightedness in the 'fix' been more prevalent. Therefore, spend, spend, spend can give the illusion of 'good times' getting you votes.
A Fact - stock market bubbles are created by excesses that appear to defy gravity. First, they must have the environment to inflate beyond the 'bubble' capacity. The bubble is forming but premature bearishness in the Y2K rally of 2000, ruined some traders careers. The last 10% upward in a bubble comes quickly and almost effortlessly.
Trading is never an exact science but it is a business that requires the successful to have common sense, knowledge, patience and determination. Emotions creates opinions that are misconstrued as facts. Opinions lose money. Just the facts please!