Three Reasons Why 2012 Is Shaping Up to Be a Disaster

Wednesday, January 11, 2012
By Paul Martin

By Graham Summers

I’ve received a number of emails regarding the fact that stocks continue to rally despite Europe being on the verge of Collapse. Once again, investors are forgetting that stocks are the most clueless asset class on the planet.

Indeed, here are three reasons why this latest stock market rally isn’t to be trusted.

1) Volume has fallen from awful to absolutely horrendous.

Stocks traded roughly nine billion shares on the second trading session of 2012. This marks a 36% decrease from trading volume for the second day of 2011 (nearly 14 billion shares).

Put another way, stocks are levitating on lower and lower volume. Indeed, volume on Monday of this week was the lowest volume of the year so far, even lower than that of last week.

This flies in the face of conventional market action (bull markets are marked by increasing volume) as well as the usual start of the year buying. And it serves as a major red flag that all is not well with the financial system.

Indeed, one wonders what the market would look like if volume were to pick up (hint every time that it has in the last year stocks have collapsed).

2) Bonds are forecasting an event worse than 2008

As I’ve noted countless times before, the bond market is much larger, much more liquid, and much better at forecasting developments than the stock market.

With that in mind, I’d like to point out that US Treasuries have in fact already exceeded their all time highs established during the 2008-2009 Crash. In fact, they’ve bounce off of their former all-time highs, indicating that former resistance is now support:

The Rest…HERE

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