We are now entering one of those periods of time when a broad variety of market factors resolve themselves for better or worse. When this happens, markets can suddenly shift in either direction. We can see an acceleration to the upside, or a significant trend reversal.

What are the inputs of great import that might rush into play? Consider:

Q4 Earnings reporting begin in earnest; Earnings have been at near record highs, and Q3 reports saw quite a bit of softening.

Sandy Watch conference calls for the Hurricane Sandy excuse. In terms of forward guidance, see if the Uncertainty bugaboo gets trotted out more than usual;

Uncertainty The wildly over-hyped Fiscal Cliff nonsense is behind us, only to be replaced with a just as over-hyped Debt Ceiling negotiations.

History teaches those who pay attention that there is always something coming, and Uncertainty is the normal state of affairs on this planet. Periods of Time where there is no Uncertainty can be described as “Epochs where we are lying to ourselves” and “bubbles.”

Technicals are seemingly overbought — but then again they have been for some time now. Watch market breadth and new highs & lows for some more insight into market internals;

Economic data, which has been mixed, seems to be firming somewhat. Employment is gianing, inflation is modest, and imports have ticked up. The consumer is still deleveraging, but is unafraid to spend. Finance driven purchases — think Auto sales and Housing — remains a bright spot.

Europe, which has been a clusterf#$%, seems to be resolving short term in a positive manner. I am not yet convinced that they have put into effect any long term cures, but austerity fatigue and a very active Central Bank can produce positive short term effects.

Japan may be experiencing a similar improvement.

Fund flows are a double edged sword. On the one hand, they are not the most standardized data set, and short term aberrations could easily lead to the wrong conclusion.

Sentiment: I am more concerned that following a 4 year 108% bull cycle in equities, and a year of double digit gains, the public suddenly rediscovers stocks. Based upon the fund flows above (which may or may not be accurate) this is a potential crowded trade issue.

As you can see, there are lots of unresolved issues, but we know the likely distribution of outcomes. This is called Risk, not Uncertainty.

More later this morning . . .

 

Category: Earnings, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “What I Am Thinking About As Markets Resolve Issues”

  1. PeterR says:

    AAPL will be one tell at EMA(409) and 500 support, below which is a valley of hurt until the next support around 400-420 IMO.

  2. I’d give the benefit of doubt to a bullish resolution. The overbought condition may be worked out with a mere secondary reaction (which is healthy) which doesn’t negate the primary bullish trend.

    Technically, the primary trend is bullish as it is explained here:

    http://www.dowtheoryinvestment.com/2013/01/dow-theory-special-issue-assessing.html

    So at the very least this is not a market to short.

    Regards.

  3. wally says:

    “this is a potential crowded trade issue”
    Meaning, I guess, that you’d see an everextended price rise followed by a bust?
    If so, would you try to ride it up or would you stay miles away?

  4. VennData says:

    GOP bluffing again…

    “…I think it is possible that we would shut down the government to make sure President Obama understands that we’re serious,” House Republican Conference Chairwoman Cathy McMorris Rodgers of Washington state told us…”

    Obama will say “Well People, the GOP wants to shut down gov’t. They haven’t given their detailed list of cuts that will get to a balanced budget, but they want to shut down gov’t to get my attention…”

    Hey GOP, why not publish a detailed list of cuts? That will get everybody’s attention.

    http://www.politico.com/story/2013/01/behind-the-curtain-house-gop-eyes-default-shutdown-86116.html

    The GOP is desperate for attention? They sound like the caricatures of the union leaders they hate: “We will shut down this enterprise!”

    Why not publish your list of cuts, how they balance the budget and then let people see where you stand? How will you exactly cut $1T in spending right now? Tell us GOP. Enlighten us.

    Why? ….because they can’t.. They can’t possibly cut programs for old white people that make up the majority of the spending. They want to cut the deficit to zero right now?!

    The last election shows 52% of the nation has figured this out. It’s time for a few more Republican voters to do the same, and laugh at these cheap GOP tricks. Shutting down the government? Again? Really? TSA? The military? FBI? Really? No Social Security checks? No Medicare payments? Really?

    OK. Let’s shut it down for real this time. And the way it geets turned back on is one way, when the GOP decides to. That’s it. Hey GOP, make sure your staff isn’t shut down so you can hear from the same folks who made you back down on your “fervent” anti-tax rhetoric.

    The GOP is a bunch of clowns

  5. James Cameron says:

    > The wildly over-hyped Fiscal Cliff nonsense is behind us, only to be replaced with a just as over-hyped Debt Ceiling negotiations

    Oh, I think we’re going to be right back at it soon enough . . . the recent ARTA legislation only delayed sequestration cuts until March 1 – the only reason a deal was achieved – and that date is the near the end date of when the Treasury runs out of wiggle room. And everyone appears to be digging in again . . . so we’ll have to see.

  6. [...] issues that the market is dealing with at present.  (Big Picture also Humble [...]

  7. Pantmaker says:

    I vote down. HD stock is the poster child for this kooky market. This is a $25 dollar stock dressed up in a $65 Halloween costume. For continued growth, this company depends on much of what ails us (housing, consumer financial health, employment, etc.) 15-20 year chart looks like a glorious double top.