SPX hit a high of 1192.39, when the 15-minute M/A was 1185.00. Adding +.56% gives 1191.61. The high exceeded the predicted maximum. Normally this would invalidate the previous sell signal and issue a new buy signal. However, no "system" can live in a straightjacket. At the time SPX was approaching it's predicted maximum the DJI was approaching Tuesday's high, 10,988. An old high in a key index is like gravity, as the price approaches it the force increases exponentially.
Therefore I am tolerating an outlier on the distribution curve and will call 1193.10 the SPX line in the sand. Any high beyond that will cause me to reduce shorts by 5%. The remainder is stopped by DJI > 11,005.
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Steve
ReplyDeleteWholesale inventorys are up and the bulls and news are saying this is good. Its funny how two different sides interpret the same thing differently. I look at it as a supply and demand issue and with unemployment continuing to be high you have alot of supply and little demand. This indecator if it continued to go up will only lead to more layoffs and BK's and a double dip. Glass half full or half empty, we are at a critical turning point right now. Who is right? An attorney friend of mine says BK's are higher now then he has ever seen. Foreclosures are rising again and the supply of unsold homes on the market is increasing. New clams for unemployment is still not going down. And the biggest factor of them all you pointed out not to long ago is nobody is lending. M3, fact and point well taken.
Jack
ReplyDeleteThe liquidity spigot will not turn off slowly. When it shuts off the impact will be felt in a single day across a swath of markets. So economic conditions are stagnating while liquidity is keeping the effects from being severe. When the turn comes private capital will flee risk assets all at once and the world economies will collapse. What is keeping big money in play? Zero% short-term money. Even though long bond rates are going up the Fed is ignoring the private market. Yet the dollar is rallying. This tells me that the Fed is in process of losing it's grip on private capital sentiment. Cheap short-term money is not the cattle prod that it used to be because of the ever-rising risk in free markets. When big private money assesses that risk has overcome cheap money it will pull out, but that will cause all of the casino money (hedge funds, banks' proprietary trading, etc.) to pull at the same time because the world is now overrun with momentum players with cheap money. My game is to stick my neck out at discrete time windows and commit funds ahead of the rush to the exits.
Why does big money care about short-term rates? Because a good slug of it is normally invested in short-term instruments. When those rates fall to near-zero then big money accepts higher risk, normally longer maturities, except that the crisis drove long maturities down to unattractive levels. As rates go up on intermediate and long maturities around the world big money is starting to have attractive, lower-risk alternatives.
ReplyDeleteSteve
ReplyDeleteAny one that's buying equities right now are buy the nose bleed sets thats for sure.