The Temptress

The FTSE 100, Dow, NASDAQ, and S&P 500 are up 50-70% since early March.

Stock market indices continued their extraordinary eight-month rally today:

The Dow Jones Industrial Average leapt to a new 13-month high Monday as investors grew more optimistic about the continued flow of easy money to support economic recovery.

The Dow climbed for a fourth straight day, up 203.52 points, or 2%, to end at 10226.94, its highest finish since Oct. 3, 2008 and the second 200-point gain in three trading days. The blue-chip measure has risen 4.7% over the four-day winning streak that began with the Federal Reserve's policy statement last Wednesday, which quelled fears that the central bank might raise rates soon.

For what it’s worth I had been taking some money off the table in recent weeks. I had feared that stocks were overvalued compared to a mediocre-at-best near-term economic outlook and that this bull cycle / bear market rally had about run its course. But the bull appears to have a second wind.

We can already hear political spinmeisters explain the reasons for the market’s cheer: Obama supporters will say that this is a sign that the Administration’s economic policies are working, assisted by the House passage of a healthcare bill last weekend. Opponents will say that the Republican comeback in the November 3rd elections promises that no radical healthcare, carbon-emissions, or tax-increase legislation will be enacted this year and ruin the recovery.

Either way, it seems that we should be buyers. Thus the cruel temptress lures us to our doom. © 2009 Stephen Yuen

Buyers have driven stocks higher every day since the election.