1. History suggests highest probability is downside after fed cycle. 2. VIX showing exponential rise (see log scale last 10 years) 3. The Bellweather Leisure & Entertainment sectors showing worst 3mo RS to the S&P in 15 years. Defensive (Tobacco, Food/Bev, Utilities) on the rise. 4. Energy.... 5. Housing bubble pop with real estate depreciation wrecking the net worth of millions living off home equity extraction. 6. End of traditional 4 year bull market, Bear footprints all over the place. 7. For those of you familiar with short patterns, you've noticed the texbook triple top & drop surfing the 200ma. This suggests the next one down (this one) is the nosedive. How low do we go?
After today, it seems like we're just getting started in the rate tightening cycle. I wouldn't be surprised after a substantial oil spike that the fed starts pushing rates up by 50 basis points. That is where the market starts tumbling. Take a look at cisco earnings - news like this will make people forget about all worries, for a moment. So while I agree, we're on the verge of a bear, I'm lengthening my time frame for the continuation be directly linked to an unforeseen while foreseen oil spike. The QM and CL are the modern day fed, I have no doubt. The fed will follow sheepishly.
Could well be, Mr. scriabinop23 Most traders/investors (and the pumpers on MSNBC) think notes and bonds are warm and fuzzy pieces of paper to buy. Sure, the past 25 years has been great for bonds. But markets are pendular. Years ago I was registered Series 7. I remember selling some very low coupon Munis to an old guy, must have been in 1983 or 1984. The bonds were issued in the '60s and had maybe 24 months to go. The buyer joked to me that he would be the first person to ever make money on those bonds.
You know, it all really depends where the fed's priorities are. If its support the housing market (and transitively the entire economy so dependent on it), then Bill Gross of Pimpco is right, and we're in the beginning of a bull for bonds. If its fighting inflation, and peak oil is possibly true (which it seems more and more everyday), then we're not quite there. Its crazy to read about prudhoe and how the a large percentage of what comes out of the field now is water, and possibly accelerated the pipeline corrosion. Same goes with thing I'm reading about Mexico production, recent info on Indonesia (hell, they are quickly even declining on nat. gas as well), etc. The question is if inflation is worth fighting at the expense of everything else short term ? And if we do overshoot and send the world economy into recession enough to kill oil demand, then we win the battle against expensive oil, at least for now. That is until oil declines accelerate supply shortage even past demand-destruction 'demand'. The only way out of this is increased efficiency, reduced consumption, or the dreaded 'nuclear' word.
Well, that could be, Mr. scriabinop23 I read recently that Bank of Japan has more U.S. dollars in reserves (Treasuries) than the Fed has in Washington. So how much flexibility the Fed really has may be debatable. I think the BOJ prefers better rates on the dollars they hold, and I don't think they care what happens to the U.S. housing market. MHO
exactly why I believe there will be a choice: vain attempt to save housing at the expense of the dollar, or stronger dollar inflation fighting policy at the expense of the economy (global equities market). It looks like their choice will be #1. Buy euros. (i'm not so high on the yen just because the Japanese debt situation is similar to ours.)