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Pastimes : The Philosophical Porch

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From: Rarebird	8/24/2006 9:28:39 AM
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Market Fragments: There is a tug-of-war going on in regard to the health of the US economy and the Federal Reserve among traders/investors. Weak economic numbers sometimes get interpreted in a positive light where the Fed will continue to pause, inflation pressures ease and a soft landing results. This is Optimistic American Nirvanna at its best, Alice in Wonderland Analysis, Apple Pie in the Sky, Love at First Sight. However, if the economic numbers come in too weak, investors/traders sometimes worry that the economy may be gearing up for a recession. After all, the housing bubble has burst and Americans can no longer use their house as an ATM machine. Plastic is still available so credit card debt is now surging. Fed chairman Moscow sent a shock wave through the hearts of some bulls on Tuesday by stating explicitly that the Fed may need to raise rates again due to inflationary pressures. The Bulls chose to ignore his words. Everything is still beautiful in its own way. Denial only lasts so long. Reality eventually asserts itself. As a trader, the key is to know when. Look at the most recent AAII: "Are you BULLISH? AAII members are: (as of 8/23/2006) Bullish: 39.35% Neutral: 23.23% Bearish: 37.42%" Bulls are now beginning to gain confidence. But denial takes many shapes and forms. One such form is thinking that one can always overcome uncertainty. Obviously the Bulls think it's possible. That's why they have been going on a mini buying spree over the last hour of trading when the market has been down substantially. I'm expecting a very nice down day where the bulls give up during the last hour of trading. Today looks like a good day for this to happen. Watch for a Bear raid after a strong open. After all, isn't this suppose to be the day the Bulls recapture market momentum? Market Fragments represents a piece of the great world, which I call Life.

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