This seems to be a continuing theme for whoever is driving the markets to the moon, sell the dollar and buy equities. If you were watching yesterday you would have noticed that oil, gold and stocks were trading down to relatively flat. Right about 12:00 the dollar started to decline which drove stocks and commodities higher.
This is a continuing trend within the markets and the primary reason why we have had such a dramatic rally. However, the reduction in buying power is not worth the trade off, in my opinion. If you are watching the news channels they attribute the market's turn on higher oil prices and virtually ignore the dollar's plight, even though it is a weak dollar that moves oil. Why are they ignoring a declining dollar, I do not know, but they are.
There was really no reason for the market to be positive yesterday as unemployment numbers were not very good, but, I guess, no revision in 2Q09 GDP was somewhat good news. Either way, we are seeing continuations of a very tired bull market where the likes of AIG, Citi (NYSE:C), Fannie (FNM) and Freddie (FRE) are the market leaders. While the talking heads applaud this move I am reducing my equity position to 7%, down from 25%, most of which is international holdings.
Frankly, we are setting ourselves up for a most painful selloff which I am choosing to not participate in. I do not know when it is coming, but it will come and I am sure it will be brutal. The likes of Mark Haines seem to think that my view is very bullish for stocks; maybe it is, but I consider my view to be balanced with the data on hand. The data I see is horrible, frankly, and when AIG and Citi, both of which are heavily owned by the government, are the market leaders then we have a serious speculation bubble building.
Examine the chart below (), the data at hand and make your own call. I am sticking with the call I made 3 weeks ago, which we are barely 2% higher than now, of a market top. Of all the people I have spoken to, no one understands why we have not sold off yet and, perhaps, we will not. Until earnings catch up with valuations or valuations trade down to earnings I am very bearish on equities.