Steep ramps like the one experienced recently tend to collapse. Of course we'll have strong rebounds but likely we retrace for both technical and macroeconomic reasons. 1. Financial Times June 1, 2010 3:23 pm Canada raises interest rates The Bank of Canada has become the first G8 central bank to raise interest rates since the onset of the global recovery, reasoning that Canadaâs robust economy for the time being outweighs concerns about renewed turmoil in global financial markets 2. The FED telegraphed same. Jawboning through Hilsenrath at WSJ has preceded all prior FED moves. 3. Bernanke is a short-timer and unlikely to go out with QE full-tilt. And of course one can always find reasons for a market move in the rear view mirror, however, we are more likely to retrace some of our gains than hit 1750 followed by 2000 in the SP500. 4th qtr 2013 and 1st quarter 2014 is a different story and how the retrace plays out we could set-up a springboard for these targets to the upside unfortunately then likely followed by another bubbly crash if history tells the story and an exogenous macroevent as harbinger.
http://www.businesscycle.com/ecri-n...ls/economic-cycle-research-what-wealth-effect A chart worthy of perusal from Lakshman Achuthan's ECRI. "The equities market may be rallying but we are in a recession"
BUMP for a great post. Simple yet sweet. Key reversal also put in the 2008 top as well and many others.
Not to disappoint re: short actionable tweets on the sweets---money making trades here's a little background macro to chew on: The FED based on their de facto status as the world's reserve currency which allows printing money at will which feeds the world's economy but also is used to finance USA Deficits. Now this has worked well and continues to work well but all the money ends up chasing assets. Now with Bonds essentially zirped to zero, stocks at relative highs compared to earnings, and commodities resting after a bubble run think gold, farmland, oil, etc what's left? The mandate to achieve full employment at an inflation rate of 2% is a bit phony. That is to say Central Planners want inflation, need inflation, and will print until they achieve inflation. Why does this matter? Because QE is not over at least here. The FED does not believe dollar strength is as important as financing their deficit spending structure. So essentially we are in for a round of inflation and the obvious target is equities. The FED would love for housing, employment, and equities to rally even if it is an artifice as it will allow the repayment of the debt in dollars which are devalued. With the monetization of the US Debt and ZIRP in the context of global reserve currency status the US has gotten off very cheap with regard to fueling their deficit spending. I wonder about the new proposal regarding money market funds. This seems as though it may be the catalyst for a year-end 2013 to early 2014 rally to new highs in the SP500. Where will the one trillion of fresh liquidity roost if not for equities? Don't fight the central planners. All it takes is a new law with Cyprus-esque tones to push a new pile of money onto a primed equities market. In summary short term weakness on the heels of "a slow-down in QE", a true recession (remember not all equities markets have declines in recessions as this recession so vividly illustrates), and rising interest rates at least in those economies where the central banks care about price stability. BUT watch out for policy changes to cause a fundamental shift in the trillions in sidelined money to fuel a runaway equities market and for that matter all hard assets which haven't yet been tapped. FWIW my future posts will be one liners again.
Great thread. Just want to say that many people identify these things. What is harder for day traders is to pounce on these rare opportunities and keep the trade on for multiple days to allow it to pan out. Great job guys!!
High on May 22nd likely to hold. FYI retest of May high possible on options expiration day June 21st. If that were to occur I would expect weakness thereafter until a new low is established. High for year 1715. Target low over summer 1450.
Weak close brings a retest of 1600 into view. I would anticipate sideways markets with the combo of Fed support, summer doldrums, and the digestion of the strong bull move over last 6 months.