Q3 stock market rallies 2009

There is a stubbornness to stock market rallies at the moment, whether you believe that the central bank liquidity aspect (printing money) is causing assets to rise again namely stocks, or you see an economic denial psychology in the markets that have over emphasized a recovery in stocks. Either way you are either in these rallies or not; but degrees of caution should come into play. The last quarter has been staggering regarding the amount of gains made in stock markets, after such a hammering from March 2009 lows (Dow), to recovery so positively is astounding. Yes, in my opinion it is a rally running on empty but I have do have stock positions (discussed later in investment updates).

Technically the Dow is trading above the 50 day moving average support of 8425.97, the Dow could dip into the range of both supports (50 and 100 day). There isn't a lot of new money going into the Dow as indicated by the volume and also there is divergence of the On Balance Volume indicator and Dow price (OBV down, Dow up).

Another note is that even though the stock markets of the world more particularly the US has somewhat separated it's self from the broader ecomomy (meaning it's rallying without much external economic news) - mostly trading solely on overbought and under bought signals from it's March 2009 lows. In saying this the OBV, using as an example of when the Dow and other indices fell to March 2009 lows, the OBV support (prior to 2009 lows) occurred on 23th February 2009 (noted on OBV, Dow graph below). The bearish line on the OBV is currently edging towards the Feb 2009 support, before the market crashed.

A real shock to the markets could send Dow down towards this years lows (March 2009), but as discussed in Stock indices split form the real economy, q3 could extend stock gains, otherwise factor in a sell on some real nasty global/economic news. There is a lot of money still not flowing into stocks, more speculation than liquidity. So you can play these rallies, albeit with caution.