History Shows That Government Shutdowns Don’t Affect Stocks

‘Government shutdown’ is the buzzword of the week. Politicians use it as bargaining chip, the media loves to beat the subject to death and investors worry about what it may or may not do to their portfolio. Surprisingly, history says, ‘Don’t worry about it.’

Is the potential government shutdown a real threat to stocks or is it just a focal point that keeps investors (in particular the media) busy?

History suggests that stocks’ reaction to a shutdown is rather apathetic.

Since 1980, there have been eleven shutdowns with an average duration of 3.9 days.

The most recent one – 12/15/1995 – was the longest shutdown on record. It lasted 21 days. The other ten shutdowns between 1980 – 1995 lasted between one and five days.

The red lines on the S&P 500 (SNP: ^GSPC) chart below show all government shutdowns since 1980.

On average the S&P 500 (NYSEArca: SPY) gained 0.4% the week before the actual shutdown.

Surprisingly the S&P 500 (NYSEArca: VOO) gained 1.3% on average the week after a shutdown.

The day after the shutdown saw an average loss of 0.2%.

One Month after the shutdown the S&P 500 (NYSEArca: IVV) was positive 9 out of 11 times with an average gain of 2.5%.

We should note that all government shutdowns (going back to 1976) occurred in the fourth quarter (five started on September 30).

While October can be scary for stocks, October also has a reputation as bear market killer. The fourth quarter in general is home to various bullish seasonal forces.


History and seasonality suggest that the impact of a possible government shutdown will be shallow and short-lived.

However, 2013 is a special year. Why? Since the 1970s the S&P 500 has adhered faithfully to a 13 and 7-year cycle. Both cycles meet in 2013 and promise to exert a strong influence on stocks.

A simple chart shows just how powerful those two cycles have been. The 7 and 13-year S&P 500 cycles (along with a telling chart) are discussed in detail here: S&P 500 Cycle Analysis

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.


13-Year Cycle Projects S&P 500 Market Top

A picture speaks more than a thousand words and this S&P 500 chart shows just how powerful the 13-year (and 7-year) S&P 500 cycles have been. Danger lies ahead if those cycles end up being more powerful than QE.

Most markets are subject to boom and bust cycles.

A look at a long-term chart makes it quite obvious that the S&P 500  has strictly adhered to a 13 and 7-year cycle.

We don’t know exactly what’s causing such cycles, but if the S&P 500 SPY finds such cycles important, we shouldn’t ignore them.

13-year S&P 500 Cycle

The chart below shows the S&P 500 (monthly bars) since 1973 on a log scale.

It’s easy to spot at least three major tops and bottoms (dashed gray brackets: December 1974, August/October 1987, March 2000) spaced in 13-year increments.

Based on this 13-year ebb and flow sequence, the next top is projected to be somewhere around the year 2013.

7-year S&P 500 Cycle

What about the Great Recession? The 13-year cycle didn’t see the financial deleveraging debacle, which saw the financial sector (NYSEArca: XLF) decline 80%+, coming.

The post 2007 financial deleveraging debacle falls within the 7-year cycle, which has graced Wall Street with its presence every 5 – 7 years – 1974, 1982, 1987, 1994, 2000, 2007.

In fact, in a December 24, 2007 interview with CNBC’s Maria Bartiromo, I recommended to employ strategies that benefit from a topping market. The 7-year cycle contributed to my back-then bearish outlook.

The 7-year cycle suggests that 2013 and/or 2014 will not enter the history books as just an average garden-variety year on Wall Street.

Cycle Reliability

How trustworthy are those cycles? You are looking at the evidence. It’s all here. Whether you consider the cycles credible or file them away as bogus is up to you.

Cycle analysis is easy. In a nutshell, cycles work … until they don’t.

Regardless of its track record, no investor should base investment decisions solely on cycles (or any other single indicator).

What Cycles Can and Cannot Do

An air traffic controller that spots an unidentified object on his radar will certainly keep a close eye on it until he knows what he’s dealing with.

We don’t have to ‘ground every flight’ or sell all stocks, but the 13 and 7 years cycle should be monitored closely on our radar. A cycle high for the S&P 500 (NYSEArca: IVV) will have a similar effect on the Dow Jones (DJI: ^DJI) and every other major index and shouldn’t be underestimated.

As subscribers to my Profit Radar Report know, I always look at dozens of indicators. To confirm or invalidate the cycles I will be looking at breath indicators and key support levels.

New highs with bearish breadth divergences or a drop below key support would suggest that the cycles need to be taken seriously. As always, my real time observations will be available via the Profit Radar Report.

In the meantime, it helps to know and understand which two secret forces (secret because most of Wall Street isn’t aware of them) continue to propel stocks higher.

If or once those forces dissipate, the bearish cycles are likely to take over. The two forces are discussed in detail here:

QE Haters are Driving Stocks Higher
The Secret QE Bull Market Trade Pattern that Almost Never Fails

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.

QE Haters are Driving Stocks Higher

Stubborn bearish sentiment is one of the key reasons why stocks continue to rally, essentially giving bears the finger. Bears can’t stop the QE liquidity waves. Perhaps it’s time to stop fighting them and learn how to surf them. It would be the best for bears … in two ways.

Bears, if you are looking for someone to blame for having been on the wrong side of the trade – look in the mirror.

Yes, the Federal Reserve’s financial alchemists have artificially engineered this QE bull market and yes, the economy is still lagging.

But that’s not the only reason. The stock market is actually using the bears as a springboard for higher prices.

Stock markets don’t roll over until most of the bears throw in the towel, but bears maintain a tight grip on their bearishness even at their own detriment.

This front-page article featured in the May 5, 2012 edition of USA Today sums the situation up nicely:

“Wall Street’s long-running story about how stocks are the best way to build wealth seems tired, dated and less believable to many individual investors. Playing the market isn’t as sexy as it used to be. Stocks remain out of fashion.”

I remember this time well, because my three key indicators (I call them the three pillars of market forecasting: technical analysis, seasonality and sentiment) were about to line up for a major buy signal.

In a June 3, 2012 update to subscribers I wrote that: “The S&P 500 is within our 1,248 – 1,284 target range for a bottom. Most of my studies suggest higher prices over the coming weeks and a tradable bottom due soon. While June generally falls in the seasonally weak summer period, we find that election year Junes generally sport a strong performance”

The S&P 500 bottomed at 1,266 on June 4, 2012.

Sentiment Sours as Stocks Rally

Since then stocks have rallied and sentiment has soured.

The chart below shows just how stubborn bears are. The S&P 500 ETF (NYSEArca: SPY) soared as much as 36% since its 2012 low, yet the 6-week SMA of bullish investment advisors and newsletter-writing colleagues (polled by Investors Intelligence) is closer to readings seen near bottoms than tops (red circles).

This trend was obvious in early 2013 when the financial media was outright bearish even though the Dow Jones  just pushed to new all-time highs and the VIX (Chicago Options: ^VIX) was lingering near multi-year lows.

Via the March 10, 2013 Profit Radar Report I shared this observation with my subscribers:

“The Dow surpassed its 2007 high and set a new all-time high last week, but investors seem to embrace this rally only begrudgingly and the media is quick to point out the ‘elephant in the room’ – stocks are only up because of the Fed. Below are a few of last week’s headlines:

CNBC: Dow Breaks Record, But Party Unlikely To Last
Washington Post: Dow Hits Record High As Markets Are Undaunted By Tepid Economic Growth, Political Gridlock
The Atlantic: This Is America, Now: The Dow Hits A Record High With Household Income At A Decade Low
CNNMoney: Dow Record? Who Cares? Economy Still Stinks
Reuters: Dow Surges To New Closing High On Economy, Fed’s Help

The market likes to fool as many as possible and it seems that overall further gains would befuddle the greater number. Sentiment allows for further gains.”

Small Correction, Big Effect

The minor summer correction (big black arrow) has suffocated rising optimism before it had a chance to flourish into extremes.

Now, nearly all major US indexes are near all-time highs – the Nasdaq (Nasdaq: QQQ) is outperforming every other broad market index – but sentiment is at best neutral.

From a sentiment analysis point of view, this suggests yet higher stock prices eventually (this doesn’t preclude a deeper correction).

Aside from sentiment, there is an unnoticed but very effective technical pattern that telegraphed the onset of almost every market rally since the 2009 low.

More details about this pattern can be found here:

The Secret QE Bull Market Trade Pattern that Almost Never Fails

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.


Most Deceptive Index in the World Hits ‘All-time High’

When you see an index hit all-time highs you assume that most of its component stocks also trade near their high watermark, but that’s not the case here. The German blue chip index high watermark is inflated by 47%.

Not everything that shines is gold and not every index at new highs is really at new highs.

Germany’s 30-stock blue chip index – the Dax – is trading at all-time highs and is considered the driving force behind Europe’s bounce back.

However, the picture is not as rosy as it looks (in fact it’s much less rosy).

Everyday the Dax is bouncing from one new high to the next, but bellwether stocks like Siemes, SAP and Munich Re are trading well below their all-time high.

Siemens trades 30% below its peak reading, SAP 22% and Munich Re 60%.

How can that be?

The Dax – as quoted by the media – is a total return index, which means that dividends are added to the index. It’s automatically assumed that dividends are reinvested into the index, but dividends don’t increase share prices.

The Dax’s total return approach is unique. The Euro Stoxx 50 (NYSEAra: FEX), Dow Jones, S&P 500, Nasdaq, or Russell 2000 all do not ‘reinvest’ dividends into the index.

What’s the difference?

The chart above illustrates the difference between the Dax Performance Index (including dividends) and the Dax Kurs Index (excluding dividends).

The Dax Performance Index trades 47% higher than the ex-dividend index.

You may think what happens across the pond doesn’t affect you, but US investors own a huge chunk of the Dax. In fact, one single US investment company owns 6% of the Dax and all US investors own much more.

Exactly how much money US investors have parked in ‘made in Germany’ is discussed here: US Investors Own xx% of Germany

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.



US Investors Own 20 Percent of Germany

Germany is considered the economic locomotive of Europe. The Dax – Germany’s blue chip index – is skipping from one high to the next. This benefits US investors, which own 1 of every 5 Dax shares. One company alone owns 6%.

Foreign investors seem to appreciate ‘made in Germany.’

In the year 2000 foreign investors owned 30% of the Dax, which is the German counterpart to the Dow Jones (DJI: ^DJI). Like the Dow (NYSEArca: DIA), the Dax is made up of 30 (German) blue chip stocks.

Today foreign investors own 55% of the Dax.

For example, 3 of 4 Adidas shareholders are not from Germany. The same is true for re-insurer Munich Re. 54% of foreign investors own shares of the Deutsche Bank (translation: German Bank).

Foreign shareholders own the majority stake of 20 out of the 30 Dax components – there is no Dax ETF, but the iShares MSCI Germany ETF (NYSEArca: EWG) provides exposure to the German stock market.

One of the reasons investors around the globe favor German stocks is rising stock prices (although this is deceptive, see below).

The Dax gained 17% in the past year, which translates into $192 billion of new wealth. Ironically, that’s less than the S&P 500.  The S&P 500 ETF (NYSEArca: SPY) trades 21% higher compared to a year ago.

Still, most of the money flowing into the Dax comes from the United States. US investors own 20% of Dax shares.

Blackrock alone owns 6% of Germany’s Dax. Chinese investors own only 3% of the Dax. No doubt, the Dax gains are good news for US investors.

Unfortunately, the Dax is perhaps the most deceptive index in the world, and the ‘real Dax’ is actually only worth half as much as the Dax on steroids. How can that be? The full story can be found here: The Most Deceptive Index in the World Hits ‘All-time High’

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF


World is Now Richer Than Ever Before

Thanks to the phantom economic recovery, mainly noticed by rising share prices in stock exchanges around the world, aggregate global wealth has risen to a new staggering high … but Draghi finds a fly in the ointment.

Based on Allianz’s Global Wealth Report, global shareholders are richer than ever before.

The Global Wealth Report tracks global funds held in stocks of every country – like the S&P 500 (NYSEArca: SPY), Dow Jones (NYSEArca: DIA), internationally developed markets (NYSEArca: EFA) and emerging markets (NYSEArca: EEM) – cash and cash equivalent bank deposits, stocks and consumer funds at insurance companies.

Assets like real estate (NYSEArca: IYR), cars, and art are not included in the report.

The wealth of investors around the world reached a total of $150 trillion.

You’d think that’s good news, but Mario Draghi – Europe’s central bank president – found a fly in the ointment. It has to do with banks. In fact, Draghi is alarmed.

Here’s the full story: Europe’s ECB Warden is Alarmed … For the Wrong Reason.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF

Europe’s ECB Warden Draghi is Alarmed … For the Wrong Reason

Like Bernanke, ECB President Draghi is famous for flooding the European financial system with cheap money. The European QE (LTRO) has brought forth some side effects that have Draghi worried, although for the wrong reasons.

This came in from Germany’s Handelsblatt newspaper:

European Central Bank (ECB) President Mario Draghi is concerned about the European banking system and is ready to unleash more emergency loans.

His concern however is over the ‘wrong reason.’ What’s the wrong reason?

Excess liquidity in the European financial system has dropped from 800 billion euro to euro 225 billion.

This sounds like bad news, but it’s not.

Liquidity has dried up because European banks are paying back their 3-year LTRO loans sooner than necessary.

Here’s a brief refresher on LTRO, which stands for Long-term refinancing operations. LTRO is essentially the European counter part to QE.

There were two tranches, LTRO I and LTRO II.

  • Via LTRO I (December 21, 2011) the ECB provided euro 489 billion worth of 1%, 3-year loans to 523 banks.
  • Via LTRO II (February 29, 2012) the ECB provided euro 529.5 billion worth of 1%, 3-year loans to 800 banks.

Good News, Bad News – All Good News

This is a good news/bad news kind of scenario.

The good news is that banks are doing well enough to repay their loans sooner.

The bad news is that shrinking liquidity has resulted in higher interest rates for bank-to-bank lending.

This development threatens to choke the economic recovery in the euro zone.

“We will watch this development very carefully,” says Draghi.

No doubt they will. How dare a natural side effect of an artificial medicine challenge the EU spin doctor.

What it Means for Investors

In theory more euro loans would be bad for the euro (NYSEArca: FXE) and good for the dollar (NYSEArca: UUP). In reality, technical analysis is likely a better indicator if you are trying to figure out what’s next for the euro and dollar.

How will it affect European stocks? If European stocks (NYSEArca: VGK) respond to liquidity like US stocks (NYSEArca: SPY), we can assume that good news is good for European stocks (NYSEArca: FEZ) and that bad news is good for stocks, as long as the ECB keeps the money going.

To assure just that, Draghi confirmed that banks will have access to cheap money for years to come.

Below is a small selection of news featured in German newspapers (translated into English). You’ll find that German news sometimes brings out facets omitted domestically or simply offer a different take.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.


How Elliott Wave Analysis Helps and Harms Investors

If you look at your graduation class you’ll probably find that some of the biggest oddballs or nerds have landed the best jobs. Elliott Wave Theory (EWT) is the oddball of technical analysis, but has produced some spectacular results … spectacularly good and spectacularly bad. Here’s how to make EWT work.

The right dose is important, because it’s possible to have too much of a good thing.

Take for example mold. Mold can be dangerous so we try to stay away from it. In small doses though, mold can be all right, even tasty.

If you like Gorgonzola, Blue Cheese, or Roquefort cheese you are basically eating moldy cheese that contains Roquefortine, a mold dangerous in large quantities.

Like Gorgonzola, Blue Cheese or Roquefort, Elliott Wave analysis can be healthy (for your portfolio) in controlled quantities. Like moldy cheese, Elliott Wave analysis may also be an acquired taste.

The Technical Analysis Oddball

Elliott Wave Theory (EWT or Elliott Wave analysis) is the oddball of technical indicators. Some love it, others hate it.

But investing is supposed to be about results not emotions. So regardless of emotional bias, serious investors should take an objective look at EWT.

EWT – The Good, The Bad and The Ugly

I’ve been exposed to EWT for about 10 years and have seen EWT at its best and worst. Here are the top 4 most important facts you should know about EWT:

1) EWT is interpretative. Five different Elliotticians (that’s how followers of EWT call themselves) may have 5 different interpretations of the market’s current whereabouts and next move. Some Elliotticians (example below) know just enough to be dangerous, literally.

2) At certain inflection points the correct interpretation of EWT can be invaluable. It will provide insight no other form of analysis can (see example below).

3) Never use EWT as a stand-alone indicator. I always use EWT (when I use it) in combination with technical support/resistance levels, sentiment and seasonality.

4) EWT has been effective in spotting major market bottoms (with the help of EWT I’ve been able to get my subscribers back into the market in March 2009, October 2011, and June 2012), but rather ineffective in spotting tops.

EWT – The Good

As mentioned above, there’s a time to use EWT and there’s a time to ignore EWT.

One of the more recent times I referred to EWT was via the August 18 Profit Radar Report, which featured the S&P 500 chart below. At the time, EWT strongly suggested that with or without a minor new low, stocks are gearing up for a large rally with a target at 1,685 – 1,706 (open chart gaps) or higher.

Trend lines suggested that the S&P 500 will run out of gas (at least temporarily) at 1,735 (September 18 Profit Radar Report).

Partially based on EWT, subscribers to the Profit Radar Report were advised to go long on August 29 when the S&P 500 triggered a buy signal at 1,642.

EWT – The Bad and The Ugly

EWT is largely based on crowd behavior and social mood, which in turn affects the money flow. However, in recent years the Federal Reserve decided to ‘spike’ the money flow and throw EWT a curveball.

We’ll never know how much the Fed’s easy money policy affects EWT, but we know that since late 2009 some Elliotticians have stubbornly predicted a market crash.

Among them is the world’s largest (according to their claim) independent financial market forecasting firm, Elliott Wave International (EWI). EWI’s message has been the same for years. Below are just a few of EWI’s market crash calls:

August 2010: “Stocks are ready to resume the ongoing bear market. The next phase of selling should be broad-based.”

November 2011: “Short-term positive seasonal biases are now dissipating and an across-the-board decline should draw financial markets lower.”

September 2012: “The stock market’s countertrend rally from June stretched to an extreme. This weak technical condition should lead to an accelerated decline.”

July 2013: “U.S. stock indexes are in the very early stages of a multi-year decline.”

Interpretation Spoils Profits

As mentioned earlier, EWT is subject to interpretation. Just because one Elliottician’s (or company’s) interpretation is wrong doesn’t mean EWT is useless.

The last time the Profit Radar Report looked at EWT was on September 8. At the time the S&P 500 (NYSEArca: SPY) was trading at 1,655 and many Elliotticians thought that the market had topped for good.

In contrast, the Profit Radar Report (on September 8) focused attention on a bullish EWT option: “There is one (normally) rare exception that allows for new highs even after a completed 5-wave reversal. In fact, the 5-wave reversals in 2010, 2011, and 2012 all led to new highs. Bullish seasonality starting in October supports this outcome.”

Some Elliotticians are still fishing for a major market top and they may well be right.

However, the S&P 500 (NYSEArca: IVV), Dow Jones, and Nasdaq (Nasdaq: ^IXIC) erased their bearish divergences visible a few weeks ago and seasonality and various breadth measures suggest higher prices later on this year.

The odds of a major market top have dropped a bit, but there will no doubt be time when EWT will provide valuable clues.

Regardless of the next EWT signal, I’ll continue to evaluate the dozens of indicators that make up my forecasting dashboard and share my most valuable findings via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @iSPYETF


The Secret QE Bull Market Trade Pattern that Almost Never Fails

Experience is a cruel teacher, but nevertheless it teaches perceptive investors valuable lessons. Here’s the most important lesson this QE bull has taught me. It’s a pattern that allows us to identify when the bull is likely to strike next.

Have you ever attended a seminar where the teacher said: ‘if you only remember one thing, remember this.”

If you only know one thing about this QE bull market (in my humble opinion), let it be this: Persistence wears down resistance.

Before I explain what this means, let me insert this disclaimer:

I do not agree with the Fed’s easy money policy. It is not right, it is not fair, and it shouldn’t be legal, but my job as a market forecaster is to make money for my subscribers. If rising stocks translate into gains for my Profit Radar Report subscribers, so be it.

What I’m about to share with you has kept us on the right side of the trade (being long), even though I’ve gone on record saying that the odds of a significant market top around current prices are higher than 50%.

I also want to admit that my September 10 article on the equity put/call ratio showed a bearish extreme, which was supposed to lead to lower prices. Well, it didn’t, but QE bull trading patterns prevented us from going short at a time when (as we know now) stocks were getting ready to soar.

On the flip side (and unrelated to the QE bull trade pattern), I would be remiss not to mention that the August 7 Profit Radar Report saw higher prices coming:

“We continue to expect higher prices, since the important resistance level of 1,730 for the S&P 500 (SNP: ^GSPC) hasn’t been touched yet.” We actually went long the S&P 500 ETF (NYSEArca: SPY) when the S&P 500 moved above resistance on August 29 (buy trigger was at 1,642).

Ok, with that out of the way, let’s talk about the QE bull pattern.

Persistence Wears Down Resistance – The Pattern

Persistence wears down resistance basically means that sideways trading almost always leads to higher prices. Corrections originate from intraday reversals or gap down opens, but almost never develop straight out of range bound trading.

The green boxes in the S&P 500 (NYSEArca: VOO) chart below highlight times when range bound trading (usually 3 – 6 days) was followed by a spike higher (the red box marks an exception to the rule).

The spikes are often caused by gap up opens. The biggest chunk of the gains happen within the first minute of trade, which tends to bypass investors waiting on the sidelines. Today’s bypassed investor is tomorrow’s buyer.

Quite frequently we see the pattern highlighted via the gray oval. Consolidation – spike – consolidation – spike – consolidation – spike.

Only a coiled up snake can strike. Like a snake, the stock market (NYSEArca: VTI) coils up and strikes, and coils up and so on. The opposite is true of the VIX (Chicago Options: VXX), which has been taking a nap for most of the year, allowing investors to snooze in complacent bliss.

The night before this week’s Fed spike, the Profit Radar Report (September 17 issue) referred to this pattern once again and wrote: “A range bound market rarely precedes a top. Tuesday’s lackluster sideways session suggests at least another spike.”

When Will the Pattern Break?

Obviously QE is at the root of this pattern, and it’s commonly believed that the amount of dispensed QE (taper or no taper?) will eventually break the pattern.

This may well be, but there is another – so far unnoticed – force that can break the QE bull pattern.

This force is discussed here: Who or What Can Kill this QE Bull Market?

Hint: It’s up to investors themselves.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF

Popular German Newspaper Exclaims: Stocks Are on Drugs!

Stocks got a shot in the arm this week by favorable comments from ‘drug dealer’ Ben Bernanke. Ok, we’ve probably all heard about the drug – QE comparison, but no major newspaper has put it as bluntly and unmistakable as this one.

QE for the stock market is like drugs for a junkie. QE has the same effect (high) and the same eventual outcome (crash).

However, I had never seen this analogy on the front page of a major newspaper … until this week.

The Handelsblatt, Germany’s finance and economy newspaper, featured the “DAX on Drugs” (DAX auf Droge) article on the front page of the September 17 edition (image below).

The Handelsblatt writes (translated from German into English): “The flood of new money from central banks is driving stocks higher. For years, low interest rates have been a fast acting drug. Stocks are on a high. But more and more experts are warning of the dramatic consequences of inevitable withdrawal. Investors know that central banks are manipulating stock prices.”

That’s pretty blunt, but it doesn’t stop there: “In deed, it’s tough to find fundamental reasons for rising prices. Corporate profits are not keeping up with share prices. Even though analysts for 22 of the 30 DAX components lowered their profit forecasts, prices only moved in one direction, up.”

Stocks are Up, What’s the Problem?

Handelsblatt describes it this way: “The problem: Central banks are a temporary savior, but don’t eliminate the cause of the crisis, which is the enormous debt of citizens, corporations and countries. This creates an ever-growing addition to cheap money. Without this doping markets will crash. The longer markets are pushed up, the stronger the correction will be.”

Here’s what’s interesting about this article:

1) It graces the front page of a reputable newspaper
2) It talks about crisis even though the German DAX and US indexes are at all time highs
3) It openly and unmistakably shows the link between cheap money and share prices, calling it manipulation
4) It specifically refers to the Federal Reserve

What to Make of This

From a technical or chart analytical perspective, the German DAX is trading above strong support around 8,100. The up trend is in tact as long as trade stays above.

As a side note, there is no US traded ETF that replicates the DAX index (similar to the Dow Jones, the DAX consists of 30 ‘blue chip’ companies). The iShares MSCI Germany Index (NYSEArca: EWG) offers the best representation of the German stock market.

Germany obviously is Europe’s growth engine. The German stock market also accounts for 8.57% of the iShares MSCI EAFE International ETF (NYSEArca: EFA) and sports a close correlation to ‘our’ index of 30 blue chips, the Dow Jones .

The correlation to our Dow (NYSEArca: DIA) and S&P 500 (NYSEArca: SPY) makes the sentiment implication of the Handelsblatt article interesting.

Sentiment is a contrarian indicator, and the obviously bearish observations shared on the front page of a major newspaper are bullish for stocks. If it’s bullish for German stocks, it should also be bullish for US stocks.

If stocks rally despite obvious concerns, one wonders if anything can stop this QE bull? The following article takes a close look at this question and outlines what it will take to ‘slaughter’ this bull:

Who or What Can Kill This QE Bull Market?

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF