Tuesday, August 02, 2011

Back near 1250

Here we are again. The S&P 500 index has closed at 1254, right at the floor of its 2011 range.

If it closes much lower than this in the following days, then the lower support level near 1250 will be officially breached.

However, stock market sentiment is solidly pessimistic right now, as you can see in much of the financial news this evening. This is the lowest closing price all year, and the market has fallen below the 200-day moving average, and that's apparently caused a slight panic. Neither of those stats means anything of course, but it sure makes for exciting, breathless news. Honestly, I wish this were the start of a bear market so that I could safely ensconce my money in some bear funds - but that's just another example of market pessimism.

Pessimism more often than not translates to increasing prices, so my guess is that the market is poised to bounce again. I'm staying in cash for a little longer at least. If the S&P closes below 1240 or so first, then I'll be proven wrong about the bounce, but that still won't be an official bear market signal.

In the more distant future, global financial collapse and/or hyperinflation still looms, particularly now that the U.S. government has decided to add trillions of dollars to our national debt. The timing and form of the collapse will be as much a political decision as an economic one, so it's impossible to predict what will happen and when.

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