Once again, the movement in liquid financial assets have proven that it is a FED-owned and controlled marketplace. Gosh, it is really simple. No QE, market goes downy. More QE or just the PROMISE of more, means market goes uppy. Duh.
I was expecting the market to break to new lows and then set up a “Wyckoff Spring”. That would have cemented an overwhelming bearishness that had to be bet against. But instead the lows were simply tested a few trading days after they were made. Historically, for a double bottom to be “good”, it should happen over a longer time period and should be marginally broken. But that historical setup was wrong. We never even touched the low before blasting higher.
Here are some stats. Since Jackson Hole and the lows made at 10:30am last Friday to 10:30am Wednesday:
Dow up 781 points/7.1%
SPX up 89 points/7.8%
Nasdaq up 226 points/9.47%
Russell 2000 up 75 points/11.3%
Transports up 545 points/12.8%
Ladies and Gentlemen, these gains have come in less than three trading days and the only thing that has changed AT ALL is that QE will be revisited during the next FED meeting. THAT IS ALL. So last year’s playbook has come into play once again with this year continuing to mirror last year. The dogs are drooling…
If my market forecast were based solely on technicals I would say that what we have witnessed is a classic Bear Market Rally or a Dead Cat Bounce. And a further observation would be that equity correlations are at record highs, with down 90% days followed by up 90% days, one after the other. Those kinds of extreme technical readings used to portend some future market movement. It no longer does. So all we have is where “natural” supply and demand resides.
Historically the September/October timeframe is a weak one for the markets. But last year the market rallied sharply thanks to the promise of QE2. Then came $5-7 billion a day pumped into the marketplace. Now there is simply speculation on what QE3 will look like. The bottom line is that we are currently in neither a Bull nor a Bear market; we are in the process of establishing a new trading range and we have just reached the halfway point between our yearly highs and our recent lows–and now that we’ve rallied big for a few days, people want to know what to buy NOW. My advice: we are at one of those natural resitance points so don’t chase. The hope of more QE, a Flag Waving Holiday and month end markup time has all rolled up into one tight rally. Don’t get bagged…
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Great commentary, Scott. Thanks.
You may have missed this:
http://www.newyorkfed.org/markets/tot_operation_schedule.html
We rallied 30 S&P points on the 29th when the juice was loose.
Tomorrow is another large coupon day, and we could bounce some more going into the 3 day holiday weekend rally I was calling for. In low volume, the market can be pushed up easily.
What is even more pressing, is that fund managers have to chase the market and if they spike it tomorrow on the 1st of the month, fund managers may chase it higher.
Next week we probably go back down.
Thanks God for the FED. If they didn’t pump cash all those machines would be out of work!
Stock Market: Lights are on but nobody’s home
They were also buying from July 29- Aug 9th. And we didn’t gain any S and P points then. Failed thesis.
when lumber is doing 20 handle moves going forward.we wont be probably going down next week.
Remember when lumber kept dropping while the market advanced? It’s coming off the bottom…
QE3 may not be necessary. The economy may be ready to move on its own.
Oh shit! The only time that I’ve heard that was from Politicians, economists, Perma-Bulls & Larry Kudlow.
Be prepared for the traditional holiday bounce that will be better than the past few quarter but still be anemic…
Great advise .50% of the move . major money investors are advising clients to sell here .
Uh oh. That’s not what I want to hear…I want everyone to scream BUY at the top of their lungs!
Thx Scott!
The problem areas of europe are the COASTAL tourist oriented areas
The coasts of italy, spain, and greece. These are NOT the center of the global economy. They are doing poorly for 3 reasons .
1. The euro currency is just too expesnive. Visiting hotels and restaurants there is not worth it
2. Gasoline prices are making global air travel rates absurdly high
3. Many businesses, which used to use these tourist type areas for business meetings now use the internet, instead of face to face meetings. Price of video teleconferencing has plummeted.
So , you will probably NEVER see these areas bounce back. But they are hardly enough to destroy the actual engines of growth : India , Brazil, russia, and China EEM EEB DEM
Just got back from there , lots and lots of tourists . Portugal too .
When was the last time you saw an Airbus topping up on unleaded?