A trader's view of market

Benranke to Gross: Sorry about “Uncertainty”, but you have to deal with it.

Uncertainty is the central point in Ben’s testimony today:
``Our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk,'' he told the Joint Economic Committee of Congress in Washington today. Still, ``uncertainties have risen, and therefore a little more flexibility might be desirable.''

Uncertainty is a trader’s friend. I made much more than yesterday.

Market as a whole hates uncertainty, because uncertainty and the emotion derived from uncertainty cannot be arbitraged away. Uncertainty or emotion by definition cannot be quantified and priced, how do you arbitrage something without a price?

A trader can trade uncertainty or emotion, a market cannot. A trader can take a bullet and sell it to somebody else; a market has to eat the bullet itself.

“Uncertainty” is the bullet market has to take from Fed: sorry, you just have to eat it.

Having to balance among “four representations” (employment, inflation, bond market, USD), and possibly with a stagnation foe at least as a ghost hanging around, Fed is having a hard time. “Wait for more data” may be the only consoling word these Milton educated monetarist central bankers can tell themselves for now.

Central banks can wait, not market participants. Bonds, stocks, all have to be priced and traded, even with uncertainty in the head, and perhaps fear in the chest.

As of 1:30ET, Bond market still got a upward sloping yield curve in its mouse to chew, inflation risk and term risk not alleviated at all compared to yesterday, with more money coming in for “safe haven”.

Stock market: Bears got their revenge done, pushing down bulls completely off “that vertical line” (see my previous post, “Atop of vertical line”) intra day. Marketreflections.com


“CAF”, the shanghai index “red star” is still shining, and Asian market is actually hanging on pretty well, just like their economies. Now being pushed down from “that vertical line”, bulls may not be able to see the “red star” anymore.

Short-term, momentum is with bears now, who definitely want to take bulls to revisit the “bottom” of the trough, which was first visited on March 5, 2007.