Tuesday, October 12, 2010

So much for the "short term top"

The S&P 500 index has officially broken through the multi-month rising upper trend line.

It's now maneuvering in a narrow rising channel, which is usually broken by a decline through the bottom rather than an acceleration through the top. However, sentiment has actually been falling for the past week or so while the market has been rising, which means this rally could continue for a while.

On the fundamental side, the dividend yield of the S&P is now back below 2%, which only proves that the stock market today is a giant casino and not a real investment vehicle. Recall that the yield of the S&P 500 has spent many years above 5%, and has even touched 10% for brief periods; those yields correspond today to S&P 500 index levels of 468 and 234, respectively. For those who only speak "Dow," those high yield marks correspond to Dow 4400 and 2200, respectively.

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