Thursday 27 September 2012

On Script So Far.

Few days back I wrote that I expect lots of head fake and whipsaws. Yesterday I said that it is not yet real deal. And here we are today; another 1% gain day when GDP estimate was below 2% (nearing recession) and Europe is burning. All because China is expected to pump and save the world? One reader complained that there is no action with me but I would like to point out that it unless we have a definite trend it makes sense to wait in the sideline and not chase the bus in either direction, unless of course you are a day trader. Money not lost in trading is money earned.

So far SPX has tested 1470+ and is now moving between 1430 to 1460. Unless it clears 1460 with authority or breaks down below its 50 DMA which is around 1410 now, we are in the chop zone and taking a position in the chop zone is injurious to health.

The signals are all conflicting, both technically as well as fundamentally.  The world economy is possibly on its death bed and the doctors (central bankers) are keeping it alive with huge doses of steroid (read liquidity). It is not going to make it better, but will definitely keep it alive for a while longer while prolonging the agony.  
Looking at a very long term chart (monthly), I get a feeling that we still have another 100 point or so to run.

We got the bounce we were looking for and from here, either we test /ES 1455-60 again tomorrow and sell off or we break it and start the final phase of the journey. Seasonality and cycles say that we will take a breather; I think we will see a high in the morning and sell off in the afternoon. But that is just a guess and don’t catch my neck if it turns out some other way. It does not really matter because all I am interested to see is a failed test of the high before deciding the next course of action.

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  1. Your "wait till all the ducks line up" strategy is the right way!

  2. question: Is the Feds "money" influence so potent they could, if they wanted, go through back door purchasing in the market, to limit exact amounts of lows this market sees, or are they just a very minor player but exert (or try to) great influence, with no teeth?
    I really don't know how all this works...

    1. Well, if not in US, one central banker is already doing it and it is Japan but without much effect.In short term the purchase by central bank will push up the asset prices but it does not solve anything because there is no shortage of liquidity and debt is too high. The problem is of solvency and erosion in asset value.
      Does a dying patient become fit by heavy doze of steroid?