Japan`s Nikkei fell on friday, dragged down by Sony Corp, Nitto Denko Corp (Apple Inc supplier) and NTT Data Corp. All of them lowered their earnings guidance. Sony had a huge drop last week. European shares rise on hopes of dovish signals from ECB.
The ECB is expected to set a more dovish tone at its policy meeting on Thursday. Many people are scared because we are at an all time high and wonder where to go now. Credit Suisse said it believed equity markets would be significantly higher in 6 and 12 months’ time.
Gold are trading at $1316,70, and it is still above the support at $1300. This presious metal seems to go sideways for a while now. VIX is still low and stock market also seems to trade sideways, but I will take a closer look at it this week.
Janet Yellen wants the FED to work strenuously (like outgoing chair Ben Bernanke) to buy up bonds. She want the money to float into the private market and to increase theoretically available credit. In other words: she wants the money to be “loose”.
So far, this strategy have never been solving any recession problems. I don`t think FED have even one example in the the FED`s 100 year of history where loose money has borne along an economic recovery. She stands for something that have never worked.
The small cap stocks is the sweet spot I am talking about today. The best measure of small caps is the Russell 2000, and it has outperformed the S&P 500 by 2 to 1 over the last three months.
The Russell 2000 is up an incredible 27% over the last 10 months, while the S&P 500 is up “only” 19%. Is the small cap ride over now? Not by a long shot. And remember: 40 small cap stocks will rise 100% today! Take a look at the chart below. I have typed in the Russell 2000 compared to S&P 500.
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