Even though last Friday’s rally was not that impressive, it did lessen the downside pressure on the stock market, and early Monday stock futures have added to last Friday’s gains.
There are still quite a few hurdles facing the stock market (Gaza, Greece or the Fiscal Cliff?), and there are no signs yet the US market’s decline is over.
Some of the other global markets continue to act much better. Japan’s Nikkei-225 Index is up over 6% since last Tuesday’s low, including a 1% gain in Monday’s session. Despite the worsening economic news out of Japan, the index is now just 1.5% below its September high.
It appears that many of the big hedge funds are betting on more weakness, as they are bidding up the prices of credit-default swaps on some of Japan’s largest companies.
So far this trade is working for them, but several well-known hedge fund managers were proclaiming their bullish stance back in early 2011 and the Nikkei fell 17% for the year. Does the technical outlook support their stance now?
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