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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: chainik who wrote (294124)11/29/2010 4:07:47 PM
From: pstuartbRead Replies (1) of 306849
 
I think you have the sentiment thing pretty much covered.

As I think this afternoon's rally shows, POMO money finding its way into the indexes can trump pretty much everything else in the short term.

spx 1080 has been an important level, and we bumped up against it several times this morning. Somebody decided to jam it above that line, and it triggered a bunch of short stops. So they jammed it a bit more. With a double POMO today, the PDs had lots of fuel.

A lot of the money that came into the market in September and October in anticipation of QE2 is still there, but the indexes haven't gone anywhere since QE2 was actually announced.

Rallies like the one this afternoon show that the PDs are still willing to do the risk-on trade at least for a short while, which keeps the indexes from sinking.

What happens to all that money that came into the markets in September and October when the PDs decide risk-off is the better trade? The indexes should drop quickly when the PDs start hoarding their POMO injections or putting them somewhere other than US stocks. Lots of things could make that happen - increased risk of a Spain bailout and sharp dollar rally, declining Q1 earnings estimates, failure of Congress to extend the 2003 tax cuts, etc. Seems like we've got to have a run for the exits sometime in the next quarter, but I'm not counting on it before the end of the year. Preserving year-end performance for funds is now a big factor. This stuff always takes longer to happen than I think it will.

The dow actually closed below its 50dma today for the first time since the late-August low.
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