Thursday 5 July 2012

Cake Is Still Baking.

The cake is still getting baked. Or at least not ready to cut yet. May be some decorations are due. Which may well happen tomorrow? So far in the week, we have reached 1375 twice and we need to see 1380 tested soon. Tomorrow is NFP day. The ADP report has been better than expected. So will the NFP report will also be better than expectation? If that happens, then the hope of QE is dashed again and only a market panic can induce the required milk of kindness from Bernanke. So kind of crucial day tomorrow when bad news will be good news.

Reuters headline screams that “ Three Central Banks take action in sign of alarm”. There was small 50 Bil. pounds of QE program from BOE. The market shrugged. ECB cut rate below 1 and as there were no mention of LTRO 2, market was disappointed. Euro sold off. PBOC reduced its lending rate. But the commodity sector did not budge.  So next time the Fed brings out QE, it better be huge, or it is not going to matter. It is called the law of diminishing return.

Many of you are itching to short. May be you are already short but I would still urge caution. The technical indicators have not rolled over yet. When it does, we will have a long way to go. So why not wait for confirmation.  Let the beast exhaust itself so that we do not have much fighting to do. I think it will get over soon. So patience is requested.  If tomorrow we see 1380 being tested and S&P fails to hold on to it, maybe we can start to dip our toes to test the water. In case I do, I will send twitter.  So please join me in twitter to get the real time market action. (@BBFinanceblog). In any case, the higher the market goes from here in the next few days, more safe I would feel shorting it. There is no rush.

One thing I would like to stress is, let us not invest or trade with a bias. If they are going to flood the system with freshly minted money and Obama is keen to keep his job at any cost, why should we not join the party? However till they bring in the money, we have a chance to short. But we do not know what all shenanigans TPTB will play and what other tricks they have under their sleeves. So shorting is always a risky proposition under the present situation. It is not a free market and fundamentals have been suppressed.  Therefore, even if we know that things are bad and unsustainable, we should not trade or invest with our belief. Conviction is good, but profit is better.

Thanks for reading . Please join me in Twitter (@BBFinanceblog) and do re-tweet, post it on wall and share with your friends and circle if you like it.


  1. BB, Thanks for your sharing.

    i am amazed to see your first prediction in last post

    With NYMO very high, we may see a pullback tomorrow.

    Could you share with us more about this indicator ?

    1. Well,have I not called most of the moves correctly? I am not a day trader, so my focus and time span is different and I am not really worried about the day to day movement of the market. I am looking for a longer term trend and trying to play safe.
      NYMO is just another indicator among many technical indicator but I use it to find over bought or oversold levels. It is fairly reliable.
      Thanks for reading. Please share it with your friends.

  2. I am a bit confused, we are now in both your time and target zone, and we are still waiting, waiting for the 5th wave have been costly for both side the last few months imo.

    1. I am confused with your comment. When you say costly, what have you lost by staying on the sideline? Market have gone nowhere in this entire period except violent moves from one side to another.
      Yes, we are in the zone and as I keep repeating, this is not an exact science and I am still waiting for the confirmation that we have reached the top.So if the confirmation comes by next Wednesday instead of this Friday, what have you lost? I do not mind giving up few points either way just to make sure we are not caught in a whipsaw.
      If you do not like waiting and want action all the time, this blog is not the right place.I am not a day trader and I do not write for day traders.There is no guarantee that I will always get the best entry, at least I try to minimize risk.

    2. Now you know why I am not short yet. 20 more minutes to close. Anyone guess the close in SPY?