Confusion reigns

Market observations for the week of Aug. 16 to Aug. 20, 2010

Claymore Investments, Inc. 23 August, 2010 | 11:00PM

Over the past week there has been a lot of media hype over a technical phenomenon referred to as the Hindenburg Omen. Without getting into the gritty details, the indicator is triggered when a large number of new highs and new lows are made at the same time.

This is generally a signal of growing confusion in the marketplace and has often been a precursor to major corrections. While the Hindenburg Omen likely got a lot of attention due to its ominous name, confusion in the marketplace has been evident for quite some time. One only needs to look at the action in the bond market relative to the stock market for confirmation.

Bond yields have plunged to near-record lows (yields and price move in opposite directions) as investors appear to be positioning for a sharp slowdown in economic growth (double dip) and a possible bout of deflation. While the probability of either and/or both outcomes has been rising, ultimately neither outcome is a sure thing. On the other hand, the stock market, while down about 12% from the peak reached in late-April, still seems to be signalling a moderate recovery.

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Claymore Investments, Inc.

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