April 27th, 2012
in Gary's blogging
Yesterday's (4-26-2012) sudden meteoric rise above solid resistance levels and 50 day MA's had my head wondering what the heck just happened. Sure I know that markets will surprise you every time you think you have it figured out. But this is one time I didn't want to it to confuse me with the facts once my bearish mind was made up.
I also know full well that predicting the next-day's session, much less next week's, is nearly impossible, but as a trader you have to try anyway. Lately, I find my trading skills slipping metaphorically into a swing traders mind as I slumber through what Kevin Flynn calls the past 4 months a 'Moonshine' rally. I am patient, conservative and wait for the right time to ply the waters of the markets, but yesterday I was awoken with a start.
Today, I am wondering when this science fiction movie 'USA's Financial Rebirth' is going to end and the monster, played by DaBoyz and its supporting cast of 'The-Five-Fingered-Financiers', is overcome with some sane reasoning. So where are we going or God forbid, maybe it is a real movie? Follow up:
Now before you call me a bull is sheep's clothing Mr. Snyder can name 22 reasons why you should worry about the market's future and I whole heartily agree. Stop eating your popcorn, texting and pay attention to the facts as this movie is NOT for real. I think the financial worries that you see every day is not just a fake facade as Dr. Ben would have you believe.
22 Red Flags Indicating Serious Doom Is Coming For Global Financial Markets by Michael T. Snyder
“The financial crisis of 2008 was just a warm up act for what is coming. The too big to fail banks are larger than ever, the governments of the western world are in far more debt than they were back then, and the entire global financial system is more unstable and more vulnerable than ever before.
But this time the epicenter of the financial crisis will be in Europe. Outside of Europe, most people simply do not understand how truly nightmarish the European economic crisis really is.
Spain, Italy, and Portugal, are all heading for an economic depression and Greece, is already in one.”
You know what happens when the poo hits the fan, well the US and other World markets are going to get some on their nice G-20 suits and it won't be pretty. When this fan start slinging 'mud' in our direction what will Captain Ben Banana and his Monkeys do at that point? A very good question as it pertains to our investment strategies and planing.
The problem with Ben Bernanke is that he confuses the US Economy with the stock market and compounds basic issues by try to 'fix' both of them with QE's. A good read from Mr. Tchir but I take exception with the 500 level at 1300 as it will be more like 1200. Additionally, any QE which I have stated would/might come in June may be a watered-down version as there is much speculation that another full blown QE will have a serious negative reaction and send the markets tumbling.
The Fed Clarifies And The Market Yawns by Peter Tchir
“I think we all know now what the Fed is thinking. Ben is happy to add more liquidity to the system but is constrained by a group that needs to see bad data before they can support him. I think it is pretty straightforward on the economic data front. Bad data, particularly in jobs and housing will make the Fed react, but it will take some actual bad data, not just "blah" data like we have had the past few weeks.
The bigger question is how quickly would Ben respond to a decline in the stock market?
Although the Fed made it clear they focus on the economy, there is strong evidence that they would react to a downturn in the market, but I think they would be reluctant to move unless we saw a significant move. Without weak data, I don't think the Fed is in position to do anything until the S&P 500 broke 1,300 and bank stocks were under pressure. So there is a Bernanke put, but I think that put is much farther from "spot" than many investors believe.”
Now that I have you all worked up, let me put a cool cloth on your forehead with some sensible thoughts. Kevin Flynn has it just about right in that there is a silver lining in that the “slowdown” may also be felt in the markets as well as I pointed out in my article, yesterday.
The European Black Swan may not come to fruition as many are predicting happening this year. I am beginning to see where, from a 'cash' standpoint, the ECB, IMF et al, may actually be able to throw some water on the burning embers. Putting to rest, for the time being, the disintegration of the Euro and some of its members or the possible war with Iran.
Considering the above scenario is true, markets may take on a subdued sideways movement channels through the rest of the year. Kevin also points out that the markets are news orientated, not necessarily interested in the black clouds of 'Real' problems that surround the financial markets around the World. This 'news' thing could be the dirt thrown into the water making traversing the market waters difficult, but we will take that into account when we have to cross that bridge.
Why The Slowing Economy May Not Matter - Yet by Kevin Flynn
The talk about the economy reaching "escape velocity" has turned out to be just another case of Wall Street hype, fortified by a low-volume, four-month moonshine rally in the stock market. . . . It's a little eerie watching the European markets. There is still a lot of bad debt that needs to be written down . . . We aren't making predictions, though. One thing we do know is that the markets largely ignore the deflator, and another lowball wouldn't matter to them so long as the headline looked good.”
One commenter pointed out correctly that there are 'other' things to consider on a personal basis and not necessarily a market issue.
”Unless you are underemployed;
unless your household exists paycheck to paycheck;
unless you have virtually no financial cushion;
unless you are a young adult who cannot find paying work remotely relevant to his or her college degree;
unless you are a member of the privately employed middle class with compressing real net worth and after tax purchasing power.”
I like movies that end happily, don't you?
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Written by Gary