Can this rally be explained in light of deteriorating fundamental news such as rising unemployment and government debt levels ?
Perhaps now is the time for the prudent investor to re-assess his risk reward matrix.
Does waiting for a possible upside from current levels justify the risk at this stage?
Some analysts are saying that the current rally since 2009 has started to form a bearish ascending wedge formation on the charts, and that it's time to book profits.
The Bullish Bear Blog's view:
- The risk reward ratio is clearly not in favour of the long only investor.
- After a monster rally from the lows back in March 2009, potential downside risk clearly outweighs any possible upside.
- The mega rally has exhausted a large percentage of short positions in the market. This in turn means that the market has much less support on the downside if a correction ensues.
- Meanwhile the market continues to ignore serious issues like the Club med debt crisis, unemployment issues in the US & steadily rising government debt levels in the developed world.