I heard a rare piece of wisdom on CNBC this morning. Like the ForexLive community, the rest of the markets are debating whether or not we are experiencing another asset bubble. Someone was shouting that stocks are absurdly overvalued while a cooler head was saying, yeah, but so what, they’re going up anyway. People, the pundit said, need to trade the markets as they are, not as they think they should be.
I take this to mean that you are to ride existing trends until they cease to exist, fundamentals be damned. And remember folks, fundamentals are not just economic statistics and earnings reports, there is also the matter of liquidity. In a world awash with liquidity (and given the “wink” by the central bank 36 hours ago when Kohn said the Fed is pumping liquidity into the system to promote riskier investments) it is hard to say the day of reckoning is right around the corner.
The Fed is doing its part and the markets are doing theirs. The Fed’s ‘secret’ has been sussed out by the market for many months now, so trades are more crowded and more frustrating and liable to experience set backs. But don’t mindlessly spout about “today’s the day the bubble’s gonna burst”. I’ve thought it burst three times in November alone…The market will tell us. We’ll get a hint below 1.4760 in EUR/USD, the daily uptrend in place since March, I suspect.
