So, the SPX is up 13%, Nasdaq is up 15%, Russell up 17.5% and the Dow Transports are up 18% in eight trading days. The reasons listed by the media for these extreme gains is that Europe will be saved and that suddenly our economy isn’t so bad.
Allow me to take issue with both of these reported “facts”. If the FED gives the EU a half-trillion dollars, a similar amount to QE2, they can leverage that money. The question is “how much”? 10:1? 40:1? Would $5 trillion bail out the Euro-zone? I don’t know. But $20 trillion certainly would. Do these numbers seem realistic to you? It is past the point of Monopoly money. And there is still no agreement for a bailout. Do you think they’ll get it done? I continue to have my doubts.
But let’s forget about Europe for a second. Let’s pretend they can extend and pretend along with America. Think about our economic situation. August saw a freeze where lots of things stopped dead in their tracks. September rolled around and people got back to school and work. Some families bought shoes for their kids and the parents filled up their cars tank with gas. Plus, stocking inventory for the holiday season has commenced.
With those activities, Wall Street thinks the economy is “just fine”. So the major indices broke down and then quickly rebounded to the top of the range, like they have done seven times before during the past two months. And now that the market has rallied, the economists are changing their forecasts, from miserably negative to optimistic and hopeful.
Once again, the near-term market rally is the sole reason for a change in the economic forecast and a bullish swing in sentiment. Bears have been squashed, Bulls are pounding their chests. Even the most speculative micro-caps are running. The Wall Street Complex wins again.
But here’s some news for you: we remain in our trading range and we’re at the top of that range after one of the biggest and speediest Bear Market rallies in history. Sure, we are entering the seasonally strongest time of the year. But chasing another low-volume ramp-job is what the individual investor does to ensure their continued frustration as our economic situation muddles through.
We targeted SPX 1220 and we are now near. We will try and breakout, but why would an investor buy now after this massive move? Because there will be a greater and more frustrated fool?
Let’s talk again at SPX 1170.
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Now, let’s watch closely to see the moment when the last buyer has bought (as I’m typing this, we may be a little late for that already).
Scott,
you think 50d will hold, or will we test bottom of range again?
Spot on as usual.
Great piece, Scott. Thanks.
1227.
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Jake, 1217ish for this Nymph. I follow the 89MA as a key MA, and the monthly/multi year is right there.
they just spiked the punch bowl. i’m sorry,i’m not comin in all this. good retail #’s my ass. damnn tootin, all the sudden it’s the shits, lollipops, and rainbows………. gs is down today,banks are down today, what they dont get no lollipops today. it’s a fantasy anymore scott.
Scott, your logic and reason is getting in the way of my gambling habit. Please stop pissing in my wheaties.
Great post.
WE’RE GOING TO 999.
Great stuff as always Scott. What do you think happens if a strong GOP wins the nominee? For example, I think that if Romney wins the nominee this thing could rip in our face due to the expectations that a strong conservative in office will quickly start to turn this massive debt issue around and put an end to so many of the nonsense regulations being put in place by the EPA etc.. just feels like it could turn on a dime at any moment. Thoughts?
imho who wins nominee is insignificant at this time. Sure, it could alter things, but by how much? Not enough.
That’s because we’re going to 1320.
You need to buy.