Source: Yahoo! Finance.  Data through 2-11-11

Global markets held up well this past week in the face of the whirlwind in Egypt, and continued inflationary pressures in China and other emerging markets.  In the past 18 months, China’s market has foretold the direction of the US market.  It was not long ago that a rate rise in China, or something similar, would drop the US market.  Over the past few weeks, the Chinese market has continued its downward trend, while the US markets continue moving up.  If recent history is a guide, then China is a canary in the coal mine that we may want to pay attention to.  There are those that think that the US is decoupling from the recent connection to the Chinese markets as the Chinese are further along the economic cycle and fighting inflation.  At the same time, the US is further behind in the cycle and not dealing with inflationary pressures (yet).  Actually, the US is causing the global inflationary pressures in the emerging markets.  So, let’s give the decoupling idea some credence and look at other factors in the market.  

The VIX volatility index is extremely low considering the state of the global economy, 80% of the NYSE stocks are trading on bull signals, and the volume behind the US stock market is very light.  All three of the previous indicators are very negative technical signals.  

To say this rally is long in the tooth is an understatement.  This would not be the first time that the market rallied to overshoot into overbought territory.  New investments at this point must be carefully vetted as the gain potential is smaller than the loss potential.

Would you like an analysis of your current investment portfolio?  Call me to schedule your free consultation- 913.693.7918.

John P. Chladek, MBA, CFP^® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals.  For more information, visit https://www.chladekwealth.com.

All written content on this site is for information purposes only.  Opinions expressed herein are solely those of John P. Chladek, MBA, CFP®, President, Chladek Wealth Management, LLC.  Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness.  All information and ideas should be discussed in detail with your individual advisor prior to implementation.  Investment Advisory services are offered by Chladek Wealth Management, LLC, a registered investment advisory firm in the State of Kansas.  The presence of this web site on the Internet shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the State of Kansas or where otherwise legally permitted.