Was this a Glass half empty day ... after a while ?

Discussion in 'Trading' started by putsncalls, Nov 3, 2006.

  1. Do any of you wizards think today was the first glass half empty day in a while. Help a newbie here trying to play with sharp objects ;). A few questions here...

    --Market sold off (at least in terms of the ad line) in light of good numbers. Would you look at it in terms of confirmation of a sentiment reversal ?

    --I see S&P closed a just a wee bit below the trend line which was holding up pretty well since late July . Any convictions here ?

    --Do you think the Hedge funds will start piling on short positions trying to make up for missing the Jul-Oct rally ?

    -- Do you think the move in Gold has something to do with the 3 US carrier groups (and a fourth heading that way) off the coast of Iran since a week now ? So far Oils / currencies/ equities been ignoring that totally. Probably just my paranoia...;)

    thanks for anything useful ...
  2. The numbers weren't good today. The number of jobs increased less than expected meaning slower growth, and wages increased more than expected, meaning higher inflation.

    IOW, if numbers continue to come in like this (including the ISM index the other day) we have a situation of dramatically slowing growth coupled with increasing inflation. That spells "hard landing". I'm surprised we didn't selloff more than this today. It is evidence as to the lingering bullish undertone.

    One thing people fail to notice too is that the FED raising rates actually has the ability, maybe even a likelihood, to increase inflation before it deters growth enough to slow inflation.
  3. I understand what you are saying. Don't agree with all of it though.

    Look at the higher open. The revisions were pretty massive...I think the number were good (maybe too good) . So did the bond market . I think people also got suspicious of the two back to back huge revisions...especially in light of the election next week.

    You could argue that the higher interest rate scenario came into picture again looking at the bond yield spikes today. Maybe the economy looked as if starting to tilt towards stagflation...who knows...not me...

    just guessing here...
  4. nkhoi

    nkhoi Moderator

    Gold probl due to

    Central bank to raise deposit reserve ratio
    Updated: 2006-11-03 20:15

    BEIJING -- The People's Bank of China, or the central bank, announced on Friday that it has decided to raise the deposit reserve ratio of banks, excluding rural cooperative banks and credit cooperatives, by 0.5 percentage points, starting from November 15.


    they may find another hugerly reserve soon.

    ps. as far as market probl 2 more down day before the dead cat bounce.
  5. The higher bond yields were likely due to two main factors. The higher wages reported and an oil rally. Both of which would result in future inflation increases.

    A lot of people think the revisions were just political tricks. I'm not sure, because I'm not much of a conspiracy theorist. The higher open was just sticker shock from the revisions being unexpected, but those types of things don't usually last. Inflation is driving this market. In fact, inflation is almost always driving the market. Jobs created aren't nearly as important as wages paid in this environment. The FED has been trying to convince everyone that inflation is slowing, even while all evidence points to the contrary.

    The bond markets had priced in a rate reduction next year. Now they have to start considering the possibilities of more rate increases. The thing about rate increases is that they both speed up inflation, and slow inflation at the same time. Most people only think that they slow inflation.

    They slow inflation by:
    Making it more expensive for businesses to expand as well as making it more difficult for people to borrow money. Less leverage by both individuals and businesses means slower growth. Slower growth means less inflation.

    They speed it up by:
    Making rents more expensive. A huge portion of the core CPI is the cost of housing. Problem is that they don't consider the cost of housing to home owners. It is measured by renters, both apartments and homes. It is impossible to compare different people's mortgage payments because of interest rates. So they measure how much renters pay each month for an equivalent property.

    As interest rates go up, people leave the home owners market and enter the renters market. This causes demand and prices to go up in the rental market resulting in higher inflation.

    So in the end, initial rate increases don't really do much to slow inflation until they reach a point where businesses aren't able to increase the wages of employees to compensate for cost of living increases. That is why a "soft landing' is so hard to manufacture.
  6. half-empty for whom?

    for my trading style, I could not ask for a better type of trading day.

    intraday trading dow futures on days like today, and using my preferred setups, is a dream.

    it was just very fluid and gave very clear signals to me today