Friday, May 11, 2007

Is this it?

With yesterday's triple digit drop in the DOW, the first since the mini-crash on Feb 27, the question on everyone's mind seems, "Is this it? Is this the end of the rally?" I'm currently operating on the assumption that this is simply a correction with a final speculative phase yet to come.

Yesterday's drop was ostensible triggered by the weak retail sales figures which showed April down 2.3%. However, taken together with March's much stronger than anticipated +6% figure, it showed a two-month average of +1.85%. Not the stuff of foaming-at-the-mouth bulls, but not out-and-out bearish either. In all likelihood this was the excuse the Dow needed to take a breather. Take a look below, it can retreat to 13100 without taking out the most recent power-up trend!

And then there is FXI, the China ETF that has been lagging the Chinese domestic market which topped 4000 this week. It started this year at around 2700. The chart below was of close yesterday with featured two clear recent peaks below 113. Well, real time quote is well above 114, up over 5%!

The party goes on, for now.