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Monday, March 17, 2014

Relief rally today

Exactly as I predicted over the weekend, "......on Monday, the stock market will shoot up and gold will tank, just reversing the course of the two at least in the very short term. " Today, both Dow and S&P shot up 1% and gold plunged 1%. You may call this being a pure luck to make such an accurate prediction. Sure, any short-term prediction is always risky and gambling. But if you know how the market is working, you probably will get some sense where it will likely go next. This is a textbook behaviour, so-called "relief rally". It is typical for the stock market to dump everything when a crisis is approaching and only go to the "safe haven" such as gold and the Treasury. As soon as the crisis is actually materialized, the market is "relieved" and start to go up, transferring money from gold and Treasury into stocks. But don't believe the market will truly calm down. Expect to see more schizophrenia-type of up and down volatility till the crisis is truly resolved or a solution is found.

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