Dow’s Up but Trades are Scarce, Worrying Bulls

While investors might be excited that the Dow is close to rising above 11,000 for the first time since 2006, technical analysts warn that there could be trouble on the horizon. Worrying the analysts is the low volume of trading activity. Usually, during a bull market, you see rising volume along with rising prices. AP with the story:

“It worries a lot of us,” says Wellington Shields’ Frank Gretz, a technical analyst who specializes in pinpointing market levels at which stocks might suddenly rise or fall. He wonders whether the volume signals that the rally could soon peter out, like the big surges that preceded steep declines in the 1930s in the U.S. and in Japan more recently.

Louise Yamada, a 29-year veteran of technical analysis who heads an eponymous firm in New York, says she’s not just concerned but confused.

“Why is the market going up?” she asks. “You usually don’t see advances without volume.”

China’s Property Bubble is Worse than it Looks

The Chinese housing bubble is getting worse, reports the Financial Times. Sources in Shanghai and Beijing are claiming price increases on typical housing units of 50% to 100% per year. Official statistics put the rate of price increases in Beijing and Shanghai at 19.3% and 11.6% respectively.

Of course, whether the housing bubble continues depends upon the actions of the Chinese central bank. Will they allow the renmimbi to appreciate against the US dollar? It’s anyone’s guess.

The Financial Times:

The Chinese authorities are doing better than their Japanese counterparts in the 1980s. The central bank is tightening regulation of loan-to-value ratios and trying to end easy credit. But they are hesitating to take up the best policy – interest rate hikes and appreciation of the Chinese renminbi. The property bubble is a clear sign of overheating. China’s reported inflation rate does not show rampant inflation, but that was also the case in Japan in the 1980s. If the renminbi is appreciated, any overheating of China’s export sectors will be slowed, while standards of living will improve with higher purchasing power.