Why is the market jittery?
Burjis- I think last five days you can go back on this thread and find few of the best calls on directional trade- you just don't get it better than this in our industry -
we picked up the turn around exactly when S&P hit 993 and turned on the dot, got worried about bond weakness and gave a call on bond affecting the direction on the market although we were told 'nothing suspicious' and 'not to fight the tape' in the market we did indicate the levels at which market will sell off if bonds break 113,29, right now we are trading at 113,02 in Paris now, as I write Nekkei is down 500 points and HengSang 120 on currency worries $ is 1.82 against the mark and 117 against the yen.
Last night S&P close you all know about it down to 925.5 over our support which is 50 days MA,. Sorry for recounting all of this I wrote yesterday a piece on underlying numbers which are showing inflationary tendencies, one of them being NAPM prices other being Journal of Commerce Inflation Index and Employment cost index - my concerns are founded on very legitimate genuine reasons which are benchmarks for 'big money' until these worries are not substantially adressed we are not going to get momentum going for a rally.
The rumours of Buffet bailing out of Wells Fargo are not going to help either, why should SEC grant a special permission to the Mngmt and Buffet not to disclose the level of selling- for me even 100,000 shares constitute 'substantial holdings'
so this is certainly going to create a new over hung on the market an added uncertainity, someone had asked me yesterday when to buy puts and I requested that on break of 113,24 or 113,20 or 113,16 we could establish protective cover, I have been seeing the thread may be getting far ahead of our readers in terms of numbers crunching we do every day- and that is worrying me a bit. I hope we can bring our activity down a notch if this is becoming to taxing- enthusiasm to keep everyone informed may be at a very accelerated pace.
I am amazed that how little the relationship btw bonds and equity prices are understood or the way bond prices are reported and yields are deducted. This is ofcourse a crash course on intricacies of markets but what moves the charts are these fundamentals, if you know them well you can miss for a day or two but the basic truths and markets movements are like 'siamese twins' we need to know and master the art.
SOXx was holding well and that is one thing I think will help market not to fall of the cliff heavily had it not been for SOXx yesterday we would be down heavily below our 50 days MA. I wrote on inter relationship btw SOXx and S&P way back on this thread, as an author of this relationship and connectivity I beleive that we need to see our 367 level on SOXx to be throughly probed, much as I like the rocket like trajectory of SOXx a real test of 367 will legitimise the move upto 404 from 300 level, but I would think it all depends purely on bond direction and one bad news can prick the balloon to retest 7615, suppose you are a pork-belly commodity trader and I ask you to look at S&P or DOW chart what are you going to see without fundamentals, two things:
1; From the highs of 8300 we tested the lows of 7618, that was wave A
2; From lows of 7618 we saw a retracement to 8050, marking wave B
3; From here purely on tehnicals we will retrace back to test the lows at 7615 or it can reverse from 7700 or it will break that 7615 and test 7450 marking the wave C.
Above is a technical picture, I will bring to your attention the bonds what drew my attention on a peculiarity of bonds was that I detected bond inability to take out 114,16 for two days this normally should not have happenned. I immediately sensed something 'amiss' and wrote that infamous 7161, what is happening with bonds is a technical test of lows, in charting terms the bond broke from 117 went down to 112 to go beyond the realms of chartists restraints it had to take out 115,03 with the DOW roaring up, but it stalled even on good news- this is a important indicator of market sentiment- and moment this happenned we with our 2 cents worth noted the change in trend, market is a daily fight with lot of variables and no one can call the market because some events are beyond one's control but we have managed successfully for last few months on this thread to call the direction right, the reason we come to know of events beyond our contol is due to connectvity of our model with forces which determine the directions of the market and bond being the integral element does give an early indication.
If every thing was alright bond should have not stalled, stalling itself is a sign that some guys are having trouble buying US assets- if you see with benefit of hindsight now the weakness of $ and selling of WFC shares you could imagine that our signal yesterday was right on time.
This is how market works, it is a combination of contrary indicators , fundamentals, currency fluctuations, monetrary and fiscal impact, smart money action and momentum- it is smart money actions which matters to me a lot- like I would not be comfortable until specialists interest and members interest does not diappear- after every correction since 11th April I saw that declining rapidly - but on Wednesday to my dismay even that refused to budge. The TA is outcome of these various fundamentals- and that's what distinguishes the input on this thread I am re-active and we have also access to excellent day to day pure mathematical inputs from Nemer and Sew, together I think we are an alright team.
I will watch now a test of 112,24 my bias is that bonds may take it out purly because of technical overhung, the yields are going higher and until this rot stops we have no way to build up a base for forward thrust- I am sure we will have some good averaging force in terms of technology allocation of all our portfolios but until I see bond back on 113,29 and 114,16 my stance will be bearish- this can change overnight if we find that US assets are not losing their charm and all these talks of wage pressures and unions is overblown. I will see market trading from here on in a very sensitive period prone to slides and high voltality-
I think the bull run so far is intact but this is surely a gasping bull and need some real help from economic data- Employment cost Index will be the first to provide a jump start to falling bond prices0 if the Index closely watched by AG comes below market expectations I expect that will cause a rally but until than without a positive data we will see a market trying its technical best to test the lows. I hope our SOXx withstands the pressures and if it runs up because of divergence we may see a pull back from 7780 level.
My bias for next one week is bearish, I hope I have by tomorrow something more positive to report- one thing good can be that Buffet announces before market opens today his intention to invest big in a major financial institution or Buffet Berkshire money is fully invested in Tech's for a change- this one news can take SOXx up to 415 in two days and will pull market out of dolldrums! |
