After yesterday's post with with new indicator movements, I went back later in the evening and discovered the data had changed with new information received in the system. This changed the CBOE indicators slightly. Though the VIX still spiked up on Thursday, the CPCE changed to a continued downward sloping position with the CPC remaining in a horizontal position. Double click the graph for reference.
This does not negate the fact the daily full stochastics is at a top and appears to be ready to indicate a sell signal, the S&P and the Dow both hit their 40-day simple moving average, and the relative strength index hit 65. All of these indicators give indications of an imminent market turn-around.
This does mean the data is not as supportive of a market turn-around right now as it was right after close on Thursday. That being said, I am more inclined to wait for more confirmation from the CBOE index and daily stochastics before I enter short.
It is possible we could have some more upside ahead before the bulls run off the proverbial cliff again. I will also be watching the Transports, the Small/Mid-caps along with the SOX (the semi-conducted index) for early directional indicators/ signals.
The power of greed and fear drive the market. There are four to five times as many bullish investors in the stock market as there are investors shorting the market. Investors want to own stocks (take the long-side), so the propensity for bullishness is almost always stronger. The market also drops far faster then it goes up due to liquidity needs and buyers fear, which can feed on itself very quickly.
So prepare for a rollercoaster ride during the next several days as the battle ensues. When in doubt, cash is king and please trade cautiously and be quick to protect your profits. ALWAYS PROTECT YOUR CAPITAL BY USING STOPS if the trade goes against you.
This does not negate the fact the daily full stochastics is at a top and appears to be ready to indicate a sell signal, the S&P and the Dow both hit their 40-day simple moving average, and the relative strength index hit 65. All of these indicators give indications of an imminent market turn-around.
This does mean the data is not as supportive of a market turn-around right now as it was right after close on Thursday. That being said, I am more inclined to wait for more confirmation from the CBOE index and daily stochastics before I enter short.
It is possible we could have some more upside ahead before the bulls run off the proverbial cliff again. I will also be watching the Transports, the Small/Mid-caps along with the SOX (the semi-conducted index) for early directional indicators/ signals.
The power of greed and fear drive the market. There are four to five times as many bullish investors in the stock market as there are investors shorting the market. Investors want to own stocks (take the long-side), so the propensity for bullishness is almost always stronger. The market also drops far faster then it goes up due to liquidity needs and buyers fear, which can feed on itself very quickly.
So prepare for a rollercoaster ride during the next several days as the battle ensues. When in doubt, cash is king and please trade cautiously and be quick to protect your profits. ALWAYS PROTECT YOUR CAPITAL BY USING STOPS if the trade goes against you.
I changed the third graph down to the 2-day EMA for the $BPSPX. This allows me to understand pure market sentiment as to whether the market is trading bullish or bearish expressed in terms of a percentage. Because this graph indicates the market is still somewhat bearish, it adds a note of caution about shorting this market before the other indicators provide clear guidance.
The Fed's NUCLEAR OPTION for Our Economy:
Bernanke moved the stock and bond markets on Wednesday by announcing they are going to use "Quantitative Easing" to keep the credit flowing to private markets and to save the banking system. Some years ago, they referred to this as "monetizing" debt. They are printing $1.3 trillion dollars of new money to subsidize government. This can only be described in economic terms as the "NUCLEAR OPTION!!"
Only last week on 60-Minutes Bernanke said "things are getting better and the recession would end this year." The truth is, and this cannot be overstated enough - - THE FEDS ARE IN A PANIC! They are rolling the dice!
According to some numbers to be officially released Friday (later today), the CBO will issue a special report saying our deficit for the current fiscal year will be $3.7 trillion instead of the previously reported $2.7 trillion. But let’s work with the $2.7 trillion number. This deficit will have to be financed by selling debt. As of January 2009, we had about a $10 trillion national deficit, of which, about $3 trillion will require refinancing this year, or need to be rolled over. Adding to this the current year deficit of $2.7 trillion, our country will need to finance a total of $5.7 trillion dollars this year.
The US dollar is the world reserve currency. As of 2008, there was only $2.7 trillion in American currency reserves in all other countries in the world available to finance our debt. In other words, the world can no longer finance our debt, there’s not enough money available. This is the real reason for the NUCLEAR OPTION. And if we continue to run up more deficits to pay our bills, we will have to monetize more debt. It becomes a self-perpetuating feedback loop.
The Federal Reserve asked the Treasury permission to sell debt about six months ago before seriously inflating their balance sheet. They are not allowed to do this by charter and never did. They wanted to sell debt as a mechanism to mop up excess money in circulation once the economy turned around. Without the ability to mop up excess money, they have opened up the inflationary "Pandora Box!" They will not be able to get the money back out of circulation.
In the short term, on the plus side, the NUCLEAR OPTION will keep T-bond and mortgage rates down. But on the negative side, it will cause inflation and hammer corporate and municipal bonds, which are needed for growth.
If the gamble doesn’t work, instead of having a depression lasting a few years, which is needed to cleanse the market and return us to economic vitality; we will have an "inflationary depression." Yes, there is such a thing and it will take no less than a generation to come out of it. Experts say no country in the world has ever successfully monetized massive amounts of debt - - ever!
Only last week on 60-Minutes Bernanke said "things are getting better and the recession would end this year." The truth is, and this cannot be overstated enough - - THE FEDS ARE IN A PANIC! They are rolling the dice!
According to some numbers to be officially released Friday (later today), the CBO will issue a special report saying our deficit for the current fiscal year will be $3.7 trillion instead of the previously reported $2.7 trillion. But let’s work with the $2.7 trillion number. This deficit will have to be financed by selling debt. As of January 2009, we had about a $10 trillion national deficit, of which, about $3 trillion will require refinancing this year, or need to be rolled over. Adding to this the current year deficit of $2.7 trillion, our country will need to finance a total of $5.7 trillion dollars this year.
The US dollar is the world reserve currency. As of 2008, there was only $2.7 trillion in American currency reserves in all other countries in the world available to finance our debt. In other words, the world can no longer finance our debt, there’s not enough money available. This is the real reason for the NUCLEAR OPTION. And if we continue to run up more deficits to pay our bills, we will have to monetize more debt. It becomes a self-perpetuating feedback loop.
The Federal Reserve asked the Treasury permission to sell debt about six months ago before seriously inflating their balance sheet. They are not allowed to do this by charter and never did. They wanted to sell debt as a mechanism to mop up excess money in circulation once the economy turned around. Without the ability to mop up excess money, they have opened up the inflationary "Pandora Box!" They will not be able to get the money back out of circulation.
In the short term, on the plus side, the NUCLEAR OPTION will keep T-bond and mortgage rates down. But on the negative side, it will cause inflation and hammer corporate and municipal bonds, which are needed for growth.
If the gamble doesn’t work, instead of having a depression lasting a few years, which is needed to cleanse the market and return us to economic vitality; we will have an "inflationary depression." Yes, there is such a thing and it will take no less than a generation to come out of it. Experts say no country in the world has ever successfully monetized massive amounts of debt - - ever!
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