Tuesday 19 June 2012

Patience, Dear Mr. Watson.

SPX did remain elevated on Wednesday, i.e. today and I think it is all due to the QE expectation. Stock Traders Almanac has this to say: One of the driving forces of this speculation was a report from Goldman Sachs. Jan Hatzius, Goldman’s Chief U.S. Economist said that they “would be quite surprised if we saw no easing this week.” This was enough to stampede the bull all day. 

Disappointment is going to be huge if dear Uncle does not come up with something substantial. At today’s level, Ben cannot justify further liquidity pumping. I think SPX have to drop substantially, may be 1200-1250 level for the Fed to act. Even Greece did not go out of Euro zone. So where is the crisis?  As of today SPX reached and exceeded 1360 level. I was talking about this level when SPX broke 1284, not in very distant past. Only about 15 trading days back. But it took SPX much longer to reach here than I anticipated. I went out of the long position around 1340 level and after that SPX has moved in a range for about six trading days before breaking up. I am tempted to take up a short position tomorrow morning if the market opens higher but I have promised myself to stay away from any temptation. I think a better opportunity to short will come soon.

If Equities are going up expecting new QE, that enthusiasm has not been shared by the precious metal sector. Gold is having difficulties passing $ 1630 level. I may get out of the GLD position by the 1st week of July, depending of course on the price action. If GLD remains at this level without breaking higher, it may be prudent to get out and re-enter at a lower level.

VIX was in red outside BB for most part of the day but closed in green. It has not yet triggered a sell signal and will do so when it closes inside BB. But I think in short term, VIX may fall further, to the level of 16.50 or so before it goes up again.

G20 achieved nothing except BRIC countries promised token donation to IMF. There was serious infighting and Canada lectured Europeans which they did not like. And Germany is not going to buy bonds of PIIGS either. Greece may discuss re-negotiation conditions as much as they like, but that is all wishful thinking.
So everything else now depends on the bearded mad scientist tomorrow. Alas he does not have the necessary cataclysm yet.

Let me finish by quoting Mr. David Weidner, legendary writer on Wall St. :
You can’t time the market: Also, technical analysis is phooey. Momentum plays are foolish. Anyone who wants to sell you a plan to beat the market is full of baloney. Investing schemes are exactly that. As I’ve written before, some people will tell you that you can hedge your bets. But insuring trades has never made sense to me. If you have to spend money to hedge a bet, it probably means you can’t afford to invest the money.
When it comes to markets, what can go wrong, will, and bubbles happen. The problem is we never know which is which until it’s too late.
Too often, we’re caught up in the daily fluctuations in our portfolios. What really matters is what the investments are worth when we need them.
Mutual funds are a waste of time: The fund industry was my first beat in New York. Here’s how it was explained to me: You buy a fund. The fund trails its index but you pay a management fee and other fees that are usually diminishing returns. You will pay a fee to buy the fund, or exit it, or both. Index and exchange-traded funds are the best thing to happen to investors since cash.

Hope you are keeping your powers dry. Patience is the key in such markets which are ruled by rumours and greed. Thanks for reading http://bbfinance.blogspot.com/ . Please forward / re-tweet / post it on your wall and join me in twitter. (Twitter @ BBFinanceblog)(Stocktwits: Worldoffinance)  


  1. BB, thanks for your sharing

    someone said there's QE2.2, 600B for 9 months period. Do you think this is positive to the market?

    1. We will know for sure tomorrow afternoon. Till then only JPM, GS and other primary dealers have a better guess. Any liquidity injection is positive like a steroid to a patient.