March 10, 2011 Market Update

It has been a while since my last update. I have attached the Empire performance to the end of February. 

I have been watching the markets very carefully and have for quite some time found it very difficult to understand why the markets kept going up when it seemed that there was not really enough solid financial reason for doing so.  The only thing that I could see  keeping the markets moving up was the American policy of quantitative easing.  In effect, the American government bought back its own debt by printing money. 

But the last week or two we have started to see some realisation that the markets are not as excited about this as they were.   Both the Canadian and the American markets bounced against the 50 day moving average in February but they both fell below that today.  If the drop continues tomorrow we could see some pretty unusual trading patterns. Well, not really unusual. They may be similar to what we saw in 2008. 

I will be watching the markets tomorrow and next week with great interest.  The news people have been talking about the fact that there is unrest in Libya and that the high price of oil is the culprit driving fear into the markets.  But I am not so sure that the oil price is the issue here. Today oil dropped, gold dropped and the indices all dropped.  But bonds are being bid upwards. And the US dollar is moving upwards.  

In case you want to see a chart illustrating the technical breakdown, here is a link to the TSX

http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=TSX-I

We will watch Friday’s trading and if this continues we could easily see further breakdown next week. 

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