2008 showed that the fed cares about the core CPI and the economy first. Oil is likely to be ignored/faded by the fomc. The last two recessions were declared ended and yet the unemployment rate rose almost 1% each time during recovery, it looks pretty damn unlikely the fed would raise ff with unemployment rising, housing tanking and core cpi well in the confort zone
I am not disagreeing with you that is what the FED thinks. The FED also thought the economy was fine and they lagged the market by several months until the problems were starring at them literally in their face. These are the markets that are leading the FED, not the other way around. As I stated, my rule is, "Don't fight the FED, __unless__ the bond market is fighting them with you." I actually believe Greenspan, and now Bernanke, may act too slowly to take back easing.
I dont think market signals are particularly reliable right now, everyone is being affected by the green shoot virus, bad news are ignored(such as dismal retail sales) and any type of decent news and people go mental. Sure a 'second derivative' improvement is worth something, it shows there is a bottom eventually, but is it really worth a 40% premium in the capitalization of US stocks?
Well, if by 40% you mean the rally off 666, at least 25% of that rally imo is taking back pure panic, and I mean white in their eyes type. If you read this thread, you recall "FV" being -160 !!! at nearly the bottom, and it reached even lower intra day. I don't have any metrics other than my own "FV" to tell me where markets should be. That number is what I term slow time frame, meaning that it has predictive worth out to say two weeks, at most one month. For anything that is longer than that, I have no idea where markets should be, other than guessing like everyone else does. That is why I rarely trade any options farther out than three months out. As you can see from the "FV" this morning, imo markets are not terribly overvalued at this time by this measure.
"FV" has been hovering around 900 for days, and it does again today. News: Goldman store sales, Redbook, Wholesale trade. IRs: 4-week and 3-year note auctions. Oil futures are perky again and threatening $70 as I write this. Imo the market is using oil to defend itself against dollar weakness instead of gold, imo a correct approach. Old style intermarket analysis used bond yields in oil futures factor models, and vice-versa. Gold futures irrelevant. Yesterday had a spike near the close again. Easy enough to defend against if short. Short end of the curve continues to predict rate risings late this year, even though some market participants talking their books don't want it. Market still does not believe it and is ignoring it. When reality sets in, NQ is going to get murdered. S/R as in previous posts, 872, 878, 930, 942, 950, 972. The 920 gap fill will fill, but later than sooner it appears. Generally expanding ranges at an intermediate top is bullish. In summary, thinking says market should be correcting. What you see says it goes higher. Honor what you see, first. If it goes too far from "FV", start thinking.
"FV" ~ 920. News: MBA purchase applications, International Trade, Quarterly Services survey, Lacker speaks, Petroleum inventories, Beige book. IRs: 10-year note auction. Oil futures continue their weak dollar momentum, and imo correctly so, although, you know, there _are_ metals and other commodities other than gold that could be diversified trade, e.g., titanium. Selling solar stocks against a long oil portfolio is probably wise in the short term. Do the research first. Gold futures up, but lagging oil % wise. As I write this, SIFs are strong and ES is breaking through 950 resistance. Odds of an open near 950 is high, and if we are trading above 950 and close above it, 972 has a strong chance in the next few days. You could sell 966 with a tight stop loss (that depends on ratio of PT/SL), only because it is exactly 300 handles from the low and close enough to 972. So if your stop loss is say 973 or seven handles, your profit target should be at least 942. You would never sell 966 on a green bar, you would sell it on a red bar, even if you sell slightly below. When you are going for 25 handles, an error of 1 or 2 handles is not relevant. The comfort level of the entry is far more important. That same logic applies to selling 950, or 942 or 920 etc. If you want to short this level and don't want to miss it because we aren't trading near a resistance level, then sell on relative NQ weaknesss. So for example if ES is up say 1% and NQ is up .50%, take a shot _with_ short NQ (selling ES on weak NQ makes no sense, right? That violates trade what you see not what you think). But it is risky. S/R as in previous posts, but lets add some more to upside resistance levels, 950, (966 ?) 972, 992, 1000.
"FV" ~910. News: Retail Sales, Jobless claims, RBC Cash index, Business inventories, Nat gas inventories, Lockhart speaks. IRs: 30-year auction, several announcements. Oil futures continue to hold steady and now go sideways on equity selloffs. I find it interesting that it has not ticked off a little bit given implied interest rates going higher. Gold futures red and barring a terrorist event somewhere, are irrelevant. NQ led down yesterday as you would expect after big run ups and IRs ticking higher. Traders taking their profits with more care, since they don't want the end of day spikes that continue to appear to ruin the day. S/R as in previous posts, and tiny mathematical edge short, but nothing to get excited about. 920 gap fill continues to be a short term target.
Anyone notice the strangely thin ES DOM? Smart imo, let buyers take the market higher on thin volume, making it easier to short and costing longs as much as possible. Equity books even more pronounced thin on the offer.
"FV" ~905. News: Import Export prices, Consumer sentiment. IRs: nothing Oil futures signaling that today may be a difficult day for equities, at least on the open and morning. The consumer is ill, but $80 oil imo is the pivot that puts a bullet in the consumer's head. High prices are the best cure for high prices, or so you would think until $150/Barrel. Gold futures are going head first to $900 all things being equal. There is a ton of debate about how wrong the market is in anticipating higher rates so soon, and that there is no way the FED raises until the recovery is clear, and that in 1990 this and in 1937 that. Please, when the FED once breaks the cycle of booms (bubbles) and busts will any of these continuous mistakes mean anything to me. Most of these arguments are being made by people that weren't even alive in 1980. Volcker, through much pain probably set up the entire healthy run up in markets from 1982 to 2000. But once everything is going great, it is so hard to pull back on the reins because no one wants to be the person that anticipated bad times and is seen as a sourpuss. This is no way to get (re)elected. FED chiefs are forced to let things get out of control, and then they can do a thankless job because metaphorically, trying to steer the Titanic (US economy) with icebergs all around you is much harder than if you steer it and you slow down cautiously approaching colder water. S/R as in previous post. 920 gap fill still short term target, but edge to downside still nothing to get excited about. There are tons of stocks that are way overvalued in the short term, but there are no natural sellers, yet.
"FV" ~890 News: Empire Mnfg, Treasury Int. Capital. IRs: 3-month and 6-month auctions. Some settlements, some announcements. Oil futures initially tanked, some attributed to the Iranian elections, but more likely on dollar strength. Gold futures continue their correction with nothing in sight to stop it. There are no natural buyers of the metal probably for at least $30. S/R as in previous posts. Small edge to downside, but as stated before nothing to get excited about. 920 Gap fill short term target.