Tuesday 7 February 2012

Nobody Knows!


And that’s a fact. All the great names in technical analysis and market timing have thrown down the towel. It seems longer the Greek drama goes on, higher the market will go up.  So we have a renewed momentum and a higher high today and a hair away from SPX 1350. If this continues, we may well see SPX 1460 before March end.

In the process the bears have been ridiculed, mocked and decapitated.  I have seen many market booms and busts and one thing that never changes is the market sentiment. So I ask myself, where are we now in this graph?

And then I try to understand what is moving the market. With my limited understanding I think the only way the market can move up is because of the LTRO financing. It is QE3 by the Fed in another name and a cleaver one at that. They are providing money indirectly to the ECB, which is giving this free (almost) money to the big banks, who in turn pumping up the equities and other risk assets. The size of LTRO is about $ 1 Trillion. This it is much bigger than QE2. Out of that so far only about $ 500 billion have been used. That leaves another $ 500 billion. How far the market can go up then?  At least another 100 points in SPX.

With retail participation in the market at all time low, volume almost non-existent, the market has grind higher and consolidate overbought conditions through time lapse rather than actual correction. The HFTs and ALGOs have bought the dip along the way. In the process extremes have become more extreme. But as we all know, over bought can remain over bought for a long time, it is now time to stand aside and just wait for market to complete the course. 

10 comments:

  1. Is the $1 Trillion LTRO really provided by the FED? I thought the liquidity provided by the FED was much much less, something as ~50-100 Bio. As far as I understood the $1 Trillion of last Dec and end of Feb is provided by the ECB. But I may be wrong - do you have a link where to find more information about the LTRO? Thanks!

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  2. Very good post, BB. Thanks, TexEx

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  3. Thanks TexEx.
    Ringo, The Fed basically opened a swap line with ECB and has refused to give any figure or upper limit. So it is unlimited. ECB is giving 1 Trillion to the Banks.

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  4. Here is a funny one from WSJ:http://blogs.wsj.com/eurocrisis/2012/02/07/secret-and-imaginary-ecb-minutes-on-the-ltro/?mod=google_news_blog

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    1. yes, amusing - as a matter of fact in the German newspaper (which i try to follow from the u.s.) there's basically no discussion about LTRO... what is taking place behind the scenes is pretty incredible...

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  5. Thanks for your work. Is this deja vu? Chart appears a mini version of July 2009-Jan 2010 and Sept 2010-Feb 2011. If so, MACD appears to indicate the long awaited "DOWN" is soon, but sadly will only be 23%.....

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  6. Hello BB, ive been reading your blog regularly lately, and i appreciate your honesty and the work you put into this helping others.. But i must say, i dont agree with your post title 'no body knows'. Its like you are saying the market is random (which it isnt). I think you are just frustrated, and this happens to everyone.. When i have losing trades, i often curse at the market, but when i cool down, i know its simply my fault for not properly managing risk, or stops etc.. The talk of news/govn manipulations, also contradicts your slogan of that to ignore the news (noise). Im my opinion, you either trade the news or you dont. Simple as that. I personally dont follow the news at all. Couldnt tell you when the non farms are due or if Bernanke is giving a speech. But what really got me to write this post is when i saw you had given up on your short. Look, i could very well be wrong, but i think risk assets are due for a turn tommorow.. So this doesnt seem like just a random guess, look for signs when the GBP/USD gets to 1.5975.. Good Luck friend, and thanks for the blog. Always like to hear your thoughts. Sam

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  7. I bought short same time as you bought in Jan first week. Are you still holding short? I'm in big loss now.

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  8. I think we are at the "excitement' stage on the figure.

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  9. Thanks BB! Appreciate your blog, keep up the good work.

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