Friday, May 27, 2011


As the rally in the US equity market continues, even the most ardent ''bear'' is probably just about ready to throw in the towel.

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.

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