Tuesday 31 January 2012

Nightly Report. January 31, 2012.

 Today’s market action can be summed up as “WTF”?  But that is the nature of the topping process after a long bull run. Like an accelerating car, it has to slow down, stop and reverse. And if it is running till the gas runs out, may be one final push before stalling.

There is no reason for the equities or risk currencies to go higher except liquidity induced push. And for various reasons, that is not forthcoming from the Fed. I am very sure that the Fed will create a wealth affect right before the Presidential election.  But that is far away. For now we have to get past this week before we can see some decent pull-back in the equities.

Situation in Europe is as confusing as ever. Now the hair-cut figure has grown to 70% and even that does not guarantee any deal. Other PIIGS are closely watching and will demand the same relief. So far as Germany is concerned, it just wants to be prepared for the eventual split of Euro. Sarko is going to have the tough time.

Although I said that there is no reason for the equities to go higher, if the SPX comes close to 1300 level or breaches it, I plan to go long for a day or two. Someone out there is trying very hard for the last many trading sessions not to let SPX fall through 1300. Today was another bearish reversal day and that makes it two in four days. And yet we are holding on! 

I would like to show you a chart from Chris Kimble which is self explanatory.

Sooner rather than later, all the negative divergences will catch up with the market. NYMO is giving a sell signal with daily MACD turning over. But NASI is still on buy signal.
Thus there are conflicting TA signals and it will not be resolved unless and until the market moved decisively one way or other. I am expecting that we will get decent pull-back starting from next week. 


  1. BB, have you closed your existing shorts, or will you be going long (if SPX hits 1300) in addition to maintaining your shorts?

  2. From what I understand about the whole debt deal: it seems any agreement will not be a default as decided by the ISDA. Is this correct to assume so? It seems to me that it is the large banks who sold all the CDS's to hedge funds etc. From what I understand, it is the triggering of these CDS's that'll put the hurt on the banks.

    The more I read about this, the less I understand.

  3. I am keeping my short position and will take the long as a hedge. I think we will see a decent pull back very soon.
    Regarding the Greece saga, they will default anyway. It is just a charade. Europeans are trying to avoid a messy after effect.

  4. When you are wrong its OK to admit it and move on.
    Trend is up.It was a book case bullish flag on SPX