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Prieur Perspective: New Appetite for Risk


Investors turn to equities; commodities like oil, precious metals.

The quote du jour comes from the "out-the-box" analyst Marc Faber, who argued that the US economy would enter "hyperinflation" approaching the levels in Zimbabwe. "I am 100% sure that the US will go into hyperinflation," Faber said in an interview with Bloomberg. "The problem with government debt growing so much is that when the time comes and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate."

In other news, according to The Washington Post, senior administration officials are considering the creation of a single agency to regulate the banking industry, replacing a mishmash of bodies that failed to prevent banks from plunging into the worst financial crisis since the Great Depression.

Zeroing in on the US stock markets, this week's survey of investor sentiment from the American Association of Individual Investors (AAII) shows an increase in both bearish and bullish sentiment. Bespoke reports that in the last week, bullish sentiment increased from 33.7% to 40.4%, whereas bearish sentiment climbed from 45.4% to 48.6%. Bears, therefore, still outnumber bulls, and are at their highest level since March 12.

An analysis of the moving averages of the major US indices shows all the indices above their 50-day moving averages, with the NASDAQ Composite after last week's gains now also above the key 200-day line and the early January high. The highs of May 8 (already breached by the NASDAQ) are the most immediate targets to the upside, whereas the levels from where the rally commenced on March 9 should hold in order for base formations to remain in force.

Eoin Treacy (Fullermoney) said:

"... the logical areas for indices to encounter resistance are near round numbers. For the S&P, this would be 950 or 1,000. The FTSE 100 is currently encountering supply beneath 4,500. For India, 15,000 is the pertinent number. Brazil is currently in the region of 53,000, and if it breaks upwards from here, the next logical area for people to look at is 60,000."

Adam Hewison of has again prepared another of his popular technical analyses - this time on the British pound, oil, and gold bullion. Click here to access the short presentation.

Richard Russell, who has taken the stand that we're experiencing a bear market rally, said:

"Lowry's valuable statistics have been available for over 70 years. Normally, as a bear market nears its final low, Lowry's Selling Pressure Index sinks dramatically, thereby providing evidence that the supply of stocks for sale is sinking. The Selling Pressure Index continues to decline after the bottom has passed. This is NOT what has happened before or since the March 9 lows.

"On the low of March 9 Lowry's Selling Pressure Index stood at 884. At yesterday's close the Selling Pressure Index stood at 868, only 14 points lower than it was on March 9. Meanwhile, on March 9 Lowry's Buying Power Index stood at 120. At yesterday's close, Buying Power was at 156, which was a gain of 36 points from the March 9 low.

"To move the stock market higher in a healthy way, Buying Power must rise while Selling Pressure must decline. As things stand, there's still too much Selling Pressure (supply) built into this market."
No positions in stocks mentioned.
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