I will preface this post with the disclosure that I am 100% long.
Based on past history, the current short-term setup is very bullish. We should be looking for a nice bounce. Past history also shows the intermediate time-frame to be bullish, and we should be looking for the uptrend continue.
But these predictions are based on the market technicals.
The fundamentals are telling a different story, and it may be time to overweight their influence.
If we turn our attention to the world’s stage, we see Obama thoroughly rebuffed by the Group of 20. As if a loss of faith in American leadership is not bad enough, we learn that Ireland is being asked to take one for the Euro-team in order to avoid catastrophe in Portugal and Spain.
Back at home, we have the muni-bonds crashing, a GOP resurgence driven by fiscal conservatism, and a growing suspicion in the American populace that the Bearded One is out of his league. In the intermediate term, I cannot imagine that austerity is good for markets, and the muni-bond markets seem to agree. If the belief that the Fed is out of bullets gains traction, again, not good for markets.
What’s my point?
Fundamental factors, compared to technical ones, always seem to have a much slower affect on market gyrations. However, since the fundamentals are much more complex than the technicals, the professionals have a significant advantage. They may have weeks or months to position themselves before the rest of the planet catches up. In short, while you are buying an excellent dip and looking for a bounce off the 20 day moving average, they are quietly selling their shares to you.
The market and economic events of the past several years are not caused by one or two years of excesses, and they are not sorted out in one or two years. Most of the time we expect to see things move in cycles of roughly 17 years. By my count, we’ve still got another 7 years to go, give or take. Do not let your guards down here. Look around you. The confidence game is in full-effect. If that confidence is eroded, for a second time in as many years, do not make the mistake of thinking that it is just an acorn, falling from the tree. This time it may be the whole damn Oak..
Great post, Woodshedder.
Thanks. I’m sensing a change in the force. I’m hoping things don’t get crazy again, but I believe there is a good chance that they will. The good news is that there are plenty of simple technical methods to limit exposure to the downside.
May the technical picture prevail!
Me too Hawaii! I went on margin today, for the first time in a year. Since I closed DPS, I’m now off margin, but that should tell you how much I’m looking for a bounce here.
The daily /es looks to be bull flagging from 11/5 and the dollars up against long term resistance. Plus we have the Fibonacci 38.2% at 1187.7 which could potentially be the bottom of the flag. As such I’m long with you (but a bit uneasy) Futures are printing pretty grim numbers as I write this.
“Slower AFFECT on markety gyrations?”
Really?
And you call yourself an edumacator? 😉
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