The euphoria in the United States about the killing of Al Qaeda chief Osama bin Laden in Pakistan earlier today is likely to be followed by a final surge in the stock market, but that could well be the top of this rally.
As the sensational news broke just before by a late-night statement from President Obama, Americans celebrated in the streets outside the White House. Stock futures indicated that Wall Street would celebrate too by opening higher, with a flight from safe haven assets like gold, silver, oil and bonds.
Silver under attack
Silver also came under attack from a revision of margins in the Comex futures market which pulled the precious metal sharply away from its 1980-high of $50. But any retreat will probably be relatively short lived because silver is in backwardisation with the future price lower than the spot price due to very high demand for physical silver.
However, the death of Bin Laden is typical of a market top, the good news that stretches an overbought market to its final limit. And after more than two years of rallying from the lows of March 2008 the S&P 500 is looking very highly valued.A price-to-earnings ratio on one calculation of 27 and yield of just 1.8 per cent is a very highly stretched stock market. This reflects the ultra-low interest rates available to banks borrowing from the Federal Reserve that everybody agrees is unsustainable in the long-run but is just uncertain how long that run might be.......read on