Rising shares of some of the heavyweights like McDonald’s, IBM and Apple definitely contributed to yesterday’s rally, as the S&P; 500 overcame major resistance in the 1,313 area, a level which was last reached in August 2008.
The advance occurred despite some headwind in form of China’s second interest hike in a month designed to control inflationary pressures. Gold and silver were the beneficiaries and finally rallied after having pulled back since the beginning of this year.
Of more concern is what impact China’s slow but continuous tightening will have on global economies as we go forward. A potential real estate bubble, and the desire to rein in inflation, are events whose outcome can’t exactly be measured or anticipated.
Much depends on the magnitude of their inflation fighting efforts. Nevertheless, for the time being the domestic U.S. market hears and sees no evil and continues to head higher.
I have written much about investor complacency and it is alive and well judging by the emails and phone calls I have received. I am not being negative here, but there is only so much a market can gain without any serious correction.