I personally would be very surprised if the COMPX were to sustain a rally above 3000. I think the resistance there
could prove to be too much, resulting in a large double top on the daily. Yes we've broken the downtrend line
extending from the beginning of Sept... based on a fed rate cut impetus, but a hard look at the chart shows
formidable congestion at or near 3000. For more evidence... look at the COMPX weekly: a large descending
triangle is broken and market goes below 3000 in November. 3k is also the breakout point from '99... which
I think we can safely mark on our charts as the very beginning of an 'irrationally exuberant' cycle. Isn't it somewhat
ironic that Greenspan's famous phrase about rampant investor speculation could not have remained accurate
without a continuation of fed induced liquidity into the new year? Rumor has it that this most recent rally has also
been helped (at least in part) by these same forces. My guess is that M3 is way up, but I have yet to confirm.
Comments from others with a bearish perspective:
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The US FED is omnipotent. They are the benevolent father, that fix all ills. Like a parent that
bails their wayward offspring out of jail, time after time after time. And with the same corrosive
impact on society at large. There is never a price to pay for excess, never a lesson learned.
Let me end with a quote from a reuters article today...
``Wall Street is so convinced that Greenspan will bail them out, that they are inclined to take
greater risk than they would otherwise,'' says Ray DeVoe, market strategist for Legg Mason.
''The assumption is that in the event of a market panic, Greenspan will cut interest rates or
just do something to smooth out the problem.''
DeVoe said he has heard of a ``Plunge Protection Team,'' a sort of fiscal commando unit
involving people from the Fed, Treasury, the Comptroller of the Currency and the White
House, who would formulate what is needed to prevent a massive selloff in stocks.
After the 1987 crash, the Fed reassured Wall Street that it was there to keep the flow of cash
going amid the crisis. And in 1998, the central bank cut interest rates to prevent a global run
in financial markets amid the Russian debt default and the Asian economic meltdown. Both
times, the central bank did the right thing and the market roared back.
DeVoe believes that the ``Plunge Protection Team'' probably had a hand in the Fed's surprise
decision in January to cut interest rates as the stock market was getting clobbered.
``The fact that the Fed lowered interest rates while the stock market was opened for business
looked like a sign of panic,'' he says. ``The economy's soft landing may be developing into a
rocky one and they wanted to slow down the momentum.''
The point of my post is, why even bother worrying about anything when the FED is there to
always bail the fatcats out? The FED has had one goal during the Greenspan reign,
encourage the common man to get in debt up to his eyeballs, and use the proceeds to buy
equity lottery tickets.
bondtalk.com
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Bulls think that Big Al can solve the problem through rate reductions. Too bad that they don't do some homework.
He's run out of room. Drop the rates much more and the buck craters, the treasury market becomes a one-way
street, and an already (again) wincing bond market just wheezes to a halt. No easy corporate credit equals fast
corporate debacle. Uncle Al has, at best, maybe another 1/4 point up his sleeve before he gets drawn and
quartered by the bond pit boyz.
And about all those foreign holders of U.S. assets,....... not all of them are completely blind and some of them are
already quietly getting up before dawn to pack their tents, not wishing to experience "crowded exit syndrome" yet
again. It is insane that the sheep see fit to drive the market up even as the economy de-rails, but of such stupidity is
bearish opportunity made.
Message 15215866
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a time when rate cuts didn't help the market:
services.elliottwave.com
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Above to be taken with a grain or two of salt... just some stuff to think about on a slow Saturday. |
