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-- Posted Wednesday, 8 July 2009 | Digg This Article | | Source: GoldSeek.com

It is interesting to read that optimism among US stock investors is pretty high at the moment, despite three weeks of falling stocks and another sell off on Wall Street yesterday.

Some might take that optimism as a contrary indicator, saying that a top can not be called until optimism is at a peak. Reading investor psychology is always controversial but very relevant in any market.

Bull charge

My feeling is that having all this optimism among investors suggests that there will be one last share spike in this bear market rally, or cyclical bull if you prefer that nomenclature. It is a question of judging the animal spirits right: look that bull in the eye, does it have one last charge left?

So put yourself in the seat of these optimists, indeed you might be among them as they are clearly numerous. Would you not see a market pull back as an opportunity to jump back in and ride this bull higher?

Assuming that enough of your fellow bulls also decided to charge then this could end up looking something like a minor stampede. And there is nothing like one bull tipping off another to reinforce a trend.

So that would give us a short and powerful move upwards after what could be interpreted as a necessary correction in a cyclical bull market.

However, if you remain in the secular bear market camp then this should be seen as a terminal blow-off, which is actually exactly what you would expect to see at the end of such a sharp rally, and has been seen many times before.

Historical precedent

It will be no different this time, and the smart guys will be the ones using this cue either to exit the markets and sit in cash, or to short the whole thing.

For going back to fundamentals: there is no economic recovery. The market has priced in a recovery. Once the market realizes its error of optimism then there is going to be one almighty crash to an error of pessimism position.

Do you want to be on the right side of this curve?

-- Posted Wednesday, 8 July 2009 | Digg This Article

About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link

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