Archive for May, 2010

Stock Market Passes Test

Thursday, May 27th, 2010

What drives the numbers behind the stock markets? Nothing less than the collective emotion of humanity.

There is a lot of correlation between past and future patterns in the behavior of the markets, and the only explainable constant is human behavioral tendencies.

One of the widely shared observations is that markets test their key levels by returning to them under certain conditions, and much is to be learned by the results of activity near these psychologically important thresholds.  It looks to me that the world’s markets are watching the test of our Dow Industrials 10,000 level. The Dow has floated unconvincingly above that level in a show of hopefulness that the 2008 meltdown has been overcome, but reverberations of that crashing of part of the house of cards that the world economy actually is, has affected Europe and set off a retest of 10,000 as a reliable support level (meaning that there is ample buying power to drive it higher than that.)

It looks to me like the test has been passed; 10,000 has held on a closing basis, even though it was pierced mid-day recently. If so, that means the entities with the most money in the world believe that the financial system will be successfully patched together for another period of growth in the world, even though it might leave behind more individuals than ever in the march toward overall stability.