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ROSENBERG: WE ARE IN A CLASSIC TOPPING FORMATION

ROSENBERG: WE ARE IN A CLASSIC TOPPING FORMATION

View of Mt. Shasta from near Weed, California

Courtesy of The Pragmatic Capitalist 

In a note to clients this morning David Rosenberg made an interesting comparison of today’s market to 2007.  He says:

“So what does the current backdrop resemble in a modern-day sense?  The summer and fall of 2007.  Think about it.  The S&P 500 has been jerking around  on either side of 1,100 for five months now.  The 10-year note yield has jumped 20 basis points from the nearby low with hardly any reason outside of negative technicals.

Go back to that period between May and October of 2007, and the S&P was just  above or just below the 1,500 mark for over five months.  Many didn’t know it  then, and we should all be taking it into consideration now, but we were in a  classic topping formation.  Back then, as is the case today, the bond market was getting hit hard with the 10-year note yield surging 50bps, to 5.2%, and the universe of economists and strategists completely bearish on the Treasury market at just the wrong time.  What goes around comes around.”

My initial reaction is to say, “this is pure datamining” but with the reflation trade, lack of regulation, rinsing and repeating of failed Keynesian policies, and the overall non-resolution of the credit crisis causes it’s fairly safe to say that we have officially returned to the status quo.   Whether this is 2007 or 1992 is unclear in my opinion.  What I do know is that we have resolved none of the problems that caused the credit crisis.  Whether we are walking the edge of the cliff or on the launching pad of the next bull market remains uncertain.  What is certain is that the Fed’s boom/bust policies are well intact and the U.S. economy will continue along its flawed path of bubbles = prosperity. 


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