Transcendental Market Truths:
The Market:
The market is doing what it always does ahead of a major news event: trade in a range. Consequently, the manic moves up and down over the last few days constitute motion within the confines of a narrowing range. Usually this means the market is within a penultimate wave of a sequence. The breakout from the range is normally in the direction of the trend going into it. That would be up. However, since the news the market is waiting on is likely to disappoint, that breakout to the upside is more likely to be a "sell on the news" opportunity. The time of the denouement is likely to be either Tuesday or Wednesday of next week.
In coming weeks, the extended unemployment benefits are scheduled to expire, leaving millions of workers who are finding no jobs available without income, so it is going to take an act of Congress to extend those benefits. If this doesn't happen, it would be another mild heart attack for the economy just like July when consumer demand suddenly started dropping. There are currently five times as many people looking for a job as actual job openings. So, for every job filled, there are four people who didn't get a job because none are available. To assume that the extension of unemployment benefits is keeping those people from obtaining jobs is something that only fools would consider rational, but I've heard many deliver such pronounements. Businesses aren't hiring until they see demand pick up for what they're selling. Christmas may provide a bump up in temporary jobs, but it isn't going to last unless something more positive starts happening in Washington.
The short term could see the resolution of the contracting triangle on the S&P and a rally into next Tuesday or Wednesday.
The market is almost out of gas, but one last exhaustion rally is pretty standard for a Fed/politically-driven rally.
Anyone buying here has to have a lot of faith that the sesonal characteristics are going to bail the market out. Now, seasonals do have a lot of power behind them. However, this year seasonals haven't worked very well, as the September-October rally proves.
Friday should see more of the same as I saw on Thursday, but probably even a bit more boring in the equity markets.
The short term bounce in VIX has corresponded to a stock market that's been slowly drifting higher. That's unusual behavior. |
