Thursday 22 March 2012

Time To Get Real?

The FED’s PPT (plunge protection team) came out to talk the market up in the last hour of the trading. The Fed’s Evans gave a statement that more accommodation would be appropriate and the dogs of war started salivating. Do they think people are blind and do not notice anything? However, 3 days of red is kind of abnormal in this day and age. So for tomorrow they have confiscated all non green colours and only colour available in the market for tomorrow is green.  They will make their best efforts to paint the market green tomorrow. No wonder Ireland has made Obama an honorary Irish.  But with momentum down, it will be a difficult task. Difficult but not impossible. They may have to be satisfied with few points up before the plunge begins again next week or at least a short squeeze in morning.

I wrote last night that I would not be surprised to see a decent size sell-off and we got one. However I am not totally satisfied because it was not even a 1% drop. All that may well change next week.

The other news was the washout in TVIX.  It is a derivative of a derivative and CS has made it a closed ended ETF. I understand that they have now stopped supporting it. You may read more about TVIX here: What You Need to Know About the TVIX Freeze | Outside The Box Blog | Schaeffer's Investment Research

The following is a quarterly chart of Apple.

It reminds me of the tulip bubble. I have no words to describe it and staying far away from Apple. By the way, does anyone remember Qualcomm in the year 1999? I would like to quote from Phil Davis:
The bull case is all about recovery, which we're just not seeing on a global basis (and even the U.S. is debatable) and INFLATION. Inflation I consider a good reason to bet AAPL can go to $1,000 - because $1,000 is how much a new IPhone will cost once inflation takes hold and it's very likely it will take hold as the supply of money, worldwide, is through the roof - up over 100% since 2007. The problem is that money is not moving (no velocity) so the economy is not growing. Until we see the money move through the broad economy (wage increases, interest rates rising), we're not going to have inflation that sticks because the consumer is out of money.

However, short term trading and fundamentals are far removed. Although the market will eventually catch up with the fundamentals, the rigging and fixing game will continue at its own pace. We might as well go with the greater fool theory and hope that someone out there will buy the stock which we are holding now.

Coming back to the market, there is good bit of support between 1392 and 1390. Tomorrow it may try to break above 1400 again and a failure will start a cascade downward. For that I think we will have to wait till next week. I have been writing for past many days that cycle shows some weakness in the last week of March and that is consistent with seasonality.  

Thank you for reading . Please forward it to your friends and join me in Twitter for live market commentary. (@BBFinanceblog). 

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