In his October 28, 2009 issue of the Wellington Letter Bert Dohmen, of Dohmen Capital Research, suggests that a market top may have been reached when the S&P 500 reached an intraday high of 1101 on October 21. He suggests that Dohmen Capital’s technical research is indicating that this rally may finally be over.
Some key excerpts from the Wellington Report:
“Yes, the powers behind the scenes were able to keep things up longer because the case for the “October” stock market correction became too popular. It was easy to squeeze the early shorts.”
“Our work strongly suggests that this is now the long over due correction.”
“All the hedge fund and other money managers who have nice profits from the rally will now rush for the exits in order to preserve the gains….
So who is there to buy what these momentum players want to sell now? They will have trouble finding bargain hunters, no matter how much the financial media wants to hype the “value” of stocks.”
Mr. Dohmen seems to be in agreement with the short-term outlook for the dollar shared by Karl Denninger, Marc Faber and Harry Dent:
“Here is an important reason for a dollar rally now: towards the end of every year, banks “square” (close out ) their derivative positions in order not to show them on their financials. They will be buying dollars. This produces a rally. The short sellers will be forced to closed out their positions, adding to the fuel of a rally.”
Mr. Dohmen leaves subscribers with a recommendation to stay away from ETF’s, mutual funds and long commodity positions.
The bulls, bankers and back-room deal makers have so far been able to continue the largest stock market rally in history based on no real economicÂ fundamentals. They may, of course, be able to maintain stock market growth in the future, and even Mr. Dohmen warns that there may be a continuation of the rally into early November, but all signs now seem to be pointing to a correction, and one that will, according to Dohmen, “go lower than the bulls expect.”