A diary of the thought process behind my investment decisions
Classic reversal with an outside day and a .50 reading on th CBOE equity put/call after such a big move probably hands the ball to the bears for a couple of days at least.
tsachy, are we still overbought? When will we be oversold? Next week.
I felt a great disturbance in the Force. sound biteThere truly are odd things going on which argue for caution. First, we have serious troubles in bond markets with auction results and continuing supply issues. The global sovereign debt issues are particularly burdensome and troubling in developed countries from the U.S. to Europe. Couple this with a Bernanke comment that interest rates need to remain low but then added a note not lost on bond vigilantes. When asked about the balance sheet of the Fed he stated that there was $2.3 trillion (yes with a "T") in balance sheet items and wants to reduce it to a mere $1 trillion. As stunning as both figures are, this is just toxic waste carried at what cost? Par? If the Fed wanted to reduce these amounts then they could just be honest and mark them to market and achieve the same result since who would buy this junk at face value. Next, the current dollar rally doesn't generally bode well for U.S. stock prices as exports are made more difficult. Further, if the Chinese were to revalue the yuan higher that would be inflationary for U.S. consumers. Both the yen and euro are breaking down against Uncle Buck. Meanwhile unemployment remains high and officials predict that will continue. Housing data isn't doing anything to help either.Investors today cheered Best Buy's results and were pleased with a misleading Jobless Claims number that showed a decrease; however, the Department of Labor changed the methodology. Had the alteration not happened, the number would have risen slightly rather than fallen per the headline. Nevertheless, markets rallied strongly throughout the day only to give it all back no doubt due to some of the issues cited above and ongoing overbought conditions.Volume increased today on tremendous late day distribution while breadth was negative.
There's a sense out there something's wrong. It's the same feeling many had before the major market drop in 2007. Then it was the housing bubble and the unknown quantity of derivative instruments that were about to implode. Today it seems markets are driven primarily by trading desks with free taxpayer money. And, it just seems another Ponzi scheme now born of massive debt. Will it unravel and to what extent? Yes, it's spooky and there's a disturbance in the Force.Let's remember, we're approaching the end of the month and quarter. Bonuses are on the line for portfolio managers. They'll do what they can to protect those.
If the market goes down today we will have gone sideways for two weeks. That would make the market neither overbought nor oversold.
Post a Comment