End of the Quarter Rock & Roll!
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Following yesterday’s ugly intra-day reversal, the futures are looking strong, with the fair value on the Dow at ~200 in the green.
This is an oversold bear market bounce, and the odds favor its eventual exhaustion and reversal (there are internal metrics we can track which will help us identify if this run is the start of something more significant and lasting).
The usual rationales from pundits hold little water. Consider the explanatories we have heard this morning:
• Unemployment claims were not as bad as forecast — but do you expect any significant improvement in the employment picture over the next 3- 6 months?
• Bernanke’s Speech did not rule out further Fed action — despite his plea its up to Congress, the political pressure against him, and the ongoing attenuation of Fed action.
• European Greek Bailout is coming closer to fruition. Merkel got her votes, and it looks like some form of rescue / kick the can down the road / don’t Take the Loss is coming mid-October
• End of the Quarter is upon us, with all the attendant window dressing.
My keys for today — aside from atoning for my many sins — is to watch the breadth, the volume, and of course, be wary for any late day reversals. Watch the markets when Europe closes. Perhaps most of all, keep an eye on the news. Not the news itself, but see how markets react to new news — that is far more important.
This phase of the cycle is a trader’s market — not a buy & hold investor’s environment.
To the nimble go the spoils.
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September 29th, 2011 at 10:42 am
RE: “This is an oversold bear market bounce, and the odds favor its eventual exhaustion and reversal”
I agree…in addition, I just don’t like the “feel” of this stock market price action…it continues to feel very “unsettled” to me. I still believe that we will see a S&P500 below 1100 (currently it is at 1162), and I think the degree of “danger” here is rather high.
IMHO the main underlying driver of the peril continues to be “deflationary pressures” as I mentioned in this post:
http://economicgreenfield.blogspot.com/2011/08/near-term-direction-of-stock-market.html
September 29th, 2011 at 12:31 pm
Doing some swing trading in here but that is usually measured in days, a week or two at most; intermediate indicators suggest more cash would be wise so that’s that.
Long-term accounts are value-based and pretty much standing pat as they have since end of ’08 when I increased equity, gold and long-bond exposure but valuations have resulted in less buying than selling so cash has been increasing primarily from attrition.
I’m paying a lot more attention to Europe now that GOP survival instincts appear to be a strengthening with a concomitant reduction in the chances of grossly stupid fiscal policy or government shutdown. That’s not NO chance though, unfortunately, so have to keep some additional powder dry; I really hate it when politics increases my opportunity costs.
September 29th, 2011 at 4:09 pm
My keys for today — aside from atoning for my many sins — is to watch the breadth, the volume, and of course, be wary for any late day reversals.
Last hour meltup after drooping during the day.
Almost forgot about Rush -ahoma, hope you swept the sin slate clean.
September 29th, 2011 at 4:15 pm
BR, I cannot agree more with your statement about being nimble. It’s a great trading environment, but not for long term investment.
I just want to point out that earnings season is coming up in a couple of weeks. That may provide a bid to the market for October.
The only downside risks I can think of are China’s manuever for a soft landing and the big fat Greek default. Greek default is probably already priced in to the market, but it is counterparty risks that I am more concerned about.
September 29th, 2011 at 9:18 pm
I see this mistake about the news all the time. What ever you think about it, what is the reaction? People follow the news closely, then ignore the market’s reaction. WTF?