What has changed for the markets ?

Many HFT & retail are wondering what has changed, that markets are beginning to show strength.

Market strength is obvious based on back to back higher highs.

VIX has collapsed to 20.63.

As 2011 has taken a toll for all investors & have lost tremendous equity, many are wondering about the current strength of this market.

Markets have gone through entire 2011, dealing with US economic weakness, European debt mess & Chinese multiple tightening of bank reserve. India was also fighting runaway inflation with multiple increases of reserve requirement.

IF we take a look @ each of the above issues, there is a "change in the air"

-US economy not only has a pulse but it is coming back nicely. Unemployment claims are @ its lowest level in over 3 years. GDP could grow to 3% in 2012.

-Republican politicians had to back off & were forced to honour their "agreed compromise"...that is a "change, we all CAN live with"

-Europe is missing many headlines like Greece, Italy, Spain.

-European Banks are getting a helping hand from ECB to the tune of almost 500 billion Euros, that is serious money.

-European government have reached an agreement to enact "budgetary discipline"

-Chinese economy is slowing but inflation pressure is easing, reserve requirement are being lowered. Chinese economy should grow @ a healthy clip of 7%.

-India is also dealing with slowing economy & inflation pressure, which may be on the verge of tipping lower. First time India, did not raise its Bank reserve requirement @ last meeting. India is expected to grow its GDP @ 5%

IF we have that many "positive developments", market is reflecting that.

Some other CHANGE that may be coming are :

-High cash position of HFT & Mutual Funds. This should be deployed as confidence builds up in markets.

-Highest weighting in high dividend stocks may be tipping over to GROWTH.

-New allocation may find its way to stocks in 2012.

All in all, there are many positive catalysts which is playing a "major role" in market performance.

FEAR is subsiding as reflected in VIX.

IF all of the CHANGE is real, then we could be looking @ 2012 as a "major rebound year"

IF 2012 is a rebound year, you could be looking @ serious & SUSTAINED move UP in stock prices.

When there is a sustained move UP, then many stocks make series of new highs.

Make sure, you are in high growth strong names which has wide following.

Looks like 2012 could be the year, we all have been waiting for...... since 2008.

BLOG does NOT give buy or sell.

Saleem