Why I think this is only a correction

I don’t like the current market or rally much.

Stock prices at current levels aren’t supported by today’s economic fundamentals. Or by tomorrow’s either in all likelihood.

The last leg of this rally has been built almost solely on speculative cash flows in my opinion. Borrowing in the global dollar carry trade—where traders borrow U.S. dollars at interest rates near 0% and then use that cash to buy commodities, commodity stocks, commodity-backed currencies, and emerging market equities—has been the biggest source of that cash.

Which is why I don’t think the rally that started on March 9 is over yet. The carry trade has taken a brief leave of absence as the U.S. dollar has bounced from an oversold position. But the fundamental weakness of the U.S. dollar is too strong to deny. Read more