So, for the seventh time in the past two months, the market has put together another 6% to 10% rally in just two trading days in almost every major index. It must be the Seventh Sign Pattern. That is when God and the Devil battle for control of the markets and only breaking open the Sacred Piggy Bank stored deep in the Caves of Altamira can the Devil be postponed. And he has been postponed for another day.
I am only half sarcastic when I describe the above battle between good (uppy) versus evil (downy). This kind of insane action remains a stern warning to not short the markets no matter what the economic or market environment.
Virtually all of the major indices made a new range low on Tuesday and there was still no panic. Throughout these past few weeks there was no panic and hope continued to reign supreme. Hope that “They” would do something. Well, now Trichet has “resigned” and there is little in the way of hawkishness from the ECB. It’s print or be printed. So that is what they’ll do. But at the end of the day, its won’t matter because good money is going after bad and that money will evaporate too.
What about us, here in recession-land? Well, the inventory build-out leading up to the holidays sort of stabilized some economic numbers. But earnings estimates are still too high. None of that matters because Bernanke said the magic words: “the economy is faltering”. This is the one main thing that Central Bankers must fight tooth and nail. And this is the setup for more QE. It won’t come right now but it will magically appear sometime during the early stages of next years election season, probably at the end of the first quarter. There was no implicit promise of more free money but Wall Street knows how to read between the lines.
Are you wondering where all the sellers went? The poor performing Hedge Funds were in liquidation mode until this week when their redemption requests are put on hold until next year. Sellers? Poof, disappeared and replaced with buyers, for the moment.
I’ve been getting my buy list ready and waiting for Hope to Die . But hope is not dead yet. It remains the most essential component of the Wall Street Complex in today’s market environment. I’m pissed that my buy list goes unexecuted but this super-fast and fabulous rally comes from a new range low. We have rallied to the midsection of our range and can still recover a bit more ground, but not much more.
I know that the Central Bankers (“They”) will sell their children in order to boost asset prices and they are out in force showing that they are trying to address the problem. But it is us who will be holding the bag when their plans fail, again.
In the meantime, I will breath deeply and count to 10 as I witness:
Transports up 450 points, Nasdaq Comp up 200 points, SPX up 80 points, Dow up 600 points, Russell up 66 points. All in three days. Viva Hope…
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(dining lavishly on a plate filled with hope beans)
Robots do not panic, they merely trade in one direction until certain conditions are met and then reverse. I wouldn’t be surprised if they actually have algorithms now that are designed to not take things “too far.”
i’m not sure about no panic, some days, the big down days, it almost feels like panic has given way to resignation of another true crash…
these are great posts, Scott, and your impressive set of calls last year looks like it might play out again this year… which would be a career maker for most men.
but “good money after bad” isn’t at all accurate. QE spends nothing, nothing. It costs the government negative cash, etc. The posts may be more compelling if they avoided relatively generic bearish hyperbole. Just a thought, all respect included.
If QE cost nothing then its vehicle is worth nothing. Truly nothing.
QE costs the “taxpayers” in that it reduces the number of dollars in circulation (via reducing the amount of dollars the government pays to the private sector in interest).
But it absolutely, positively, DOES NOT, “print money” or cause inflation (except by misguided speculation, but thats not entirely the feds fault) or cost the government anything (it, in fact, saves the government money).
think about it. part of the gov’t’s bonds have interest paid only to the gov’t, saving the gov’t money.
yet ZERO dollars are actually put into the hands of “main street”, actually spent into circulation, hence no real world inflationary effect (just speculative inflationary effect).
🙂
What would a sustainable ecomony look like?
2% unemployment
20% of people aren’t realistically employable, as in they realistically can’t earn the wages they ask, because they really don’t try very hard to work at anything. Disagree? Try employing a pack of people and report back.
The “natural” rate of unemployment is way higher than 2%, when the economy gets towards 5% unemployment, it is approaching or past the point where it has to unemploy more people, probably. 🙂
for myself you couldnt more wrong. try being a foreman with a crew of grown tradesman to the tune of anywhere between 8-60 men at any given time, and jobs. and make sure that the company that hired you, are back up and running the next morning, no matter the size of said company. now on the other hand,you are right about who is, and who isnt worth their salt,is another discussion. but if you grew up in the world i did,you’ll know more than 1,2,3 trades in the crafts,and prove your salt. thus having the power to get what you ask,or you’ll end up like many self employed,like myself,,,,,,,,,and write your own ticket.but you gots to pay your dues,and there lies the problem, the lack thereof
aside from being a bartedner/busser/waiter, I have never had a real job, as it happens, … i’m a college dropout. I did go to college, on an academic scholarship, but… i doubt the world you have lived in is harsher or more poor than mine, just guessing.
i’ve only been in the restaurant biz, as a pile o shit, or self employed, and i have employed many dozens of people, and I can honestly say that a meaningful percentage of them are not worthy of having a job. they steal, they are late, they lie, they fail, they are lazy, and more.
I’d wager than the natural rate of unemployment is about 20%, and that it is simply by the grace of the tremendous talent of americana at large that we have employed so many who do not really earn their pay. The great recession just gave companies a legit inarguable excuse to … shed the fat.
and the fat will be slow to come back… it will.
i didn’t speak to “you”, I spke to percentages.
honestly, do you really think MORE than 4/5 people that get hired really care about their jobs, really try their hardest? really are concerned with the well being of their employer?
man, if that is the case nationwide, is SURE AS HELL isn’t my experience. I’d guess about 1/3 to 1/2 of people are late, steal, are lazy, whine, bitch, moan, gripe, EVEN IF you are payhing them the highest wage of their lives.
20% of people, minimum, are unemployable with their current attitudes, in my experience.
Well spoken.Panic was absolutely absent and we had a MACD positive divergence at the 1075 zone relative to the August low prints.
Keep a close eye on SPX 1164-65 and should that level be ‘taken-out’ and can ‘stick’, the 1180-90 zone ‘may’ provide stiff headwinds at the declining 50-day, which for the past couple of months, has proved formidable.
Viva La Flytonium Petey!
Operation Twist started this week. QE has started again:
http://www.newyorkfed.org/markets/tot_operation_schedule.html
The funds from Fed bond sales can be used to purchase equities just like the funds from bond purchases by the primary dealers selling can be used to buy equities.
Again, Scott, with much due respect because I love your work. I would have to disagree. Last night we got a MASSIVE QE program increase out of the Bank of England. King compared their Liquidity problem to that in of the 1930’s. The market always seems to rally on QE no matter how bad we are these days. For the end of ECB JCT term, that bond program buying imho not much to help at all. And the press conference did not give the dovish talk they were hoping for witnessed by German Bond movement….all this has fade written over it, but like I learned in 2010, QE rally can go on for months and months…I am just wondering if BoE QE is the same as ours? Will see.
Global QE; Global TARP are all but assured. Whether it be through the front or back door variety.
There is NO WAY OUT!
Very simple. Inflate or Die.
The global financial structure is unfixable/irrepable
but the “inflate” option is a helluva lot better than the “die” option…
Your reaction to a technical bounce is to despair that “hope lives?” Why is it that some bears insist that the market goes to zero every single day or else it’s all a big bluff?
No offense man, but I just don’t get your post at all. If we were to break out of this trading range higher, then I might accept the thesis that people are banking on additional QE. If we make it to half-way point and then retest the new lows we just set, are you going to tell us that hope for QE lives on every snap-back rally from now until 2012? The volatility is elevated, we are getting huge moves down, huge moves up, rinse repeat. What exactly are you expecting to see?
Not Permabearing. Know my history
My problem is velocity and correlation. It may be the new normal but it is insanity
Ok. When the market makes these huge moves downward over 2-3 days, what is the irrational hope that bears have driving it?
I don’t see why the same complaint on the upswings can’t be made equally on the downswings. The volatility goes both ways.
I will grant you today looked “eurozone hope” based.
i don’t know if scott is permanently bearish, I think he’s looking to buy around last summers repeatedly tested 1040 level…
Swing trading will be a fact of life for YEARS, and everyone will continue to argue one side over the other. I spent the past week consoling the precious metal crowd, and their Austrian School of Economics voo-doo, by telling them not to panic. Bulls and bears will both win, in 30-50 day alternating patterns, based on algorithms…like the Fly’s PPT. Who wins most of the time? Swing traders. Who loses? Those that buy the top and panic sell the bottom (like you).
Excuse me? Buy the top and sell the bottom?
Here are four facts for you:
1. My investment accounts have been in aprox 80% cash since early in the year. It feels good to watch this insane range from the sidelines, most of the time.
2. I’ve been making broad market swing calls all year and have caught just about every one but last weeks run. And I admitted to as such, in public.
3. PPT is much more near term in nature than 30-50 days.
4. Nobody gives a shit about your calls or forecasts.
Opposing opinions are always welcome here. But incorrect allegations direspectfully presented will not be tolerated.