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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Don Green who wrote (20312)	11/8/2017 11:10:39 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Hi Don, as we watch this trend of selling volatility, the trend of ultra low global interest rates and the trend of relentless global stock appreciation, the old says from the 1950's TV show starring Jackie Gleason comes to mind. ... "One of these days Alice, one of these days.... Pow..... right to the Moon!" as Hyman Minsky famously wrote about and as many of us have noted... the "stability is inherently destabilizing" What all of this leads up to is a market that has essentially sustained itself through cannibalizing on itself, binging on cheap credit to finance trillions of dollars of stock buybacks, even as these same companies barely improved their productivity at all. With record low government bond yields globally, as well as dramatic contraction of volatility in risk assets such as stocks and equity options, the world’s investment funds are desperately seeking yield. This has led them to park money comfortably in the stock market, hoping that it continues to trend higher, as well as buying government debt during quantitative easing with the knowledge that the FOMC was providing all the buying pressure necessary to keep bond prices headed higher. And finally, this led to greater bets against volatility as fund managers began to feed into the depression of volatility by selling it more and more, which of course pushes the VIX and options premiums in general even lower. -- the market is able to follow a trend much longer than anyone who were to fight it can stay solvent...... -g- we have years and and years and Trillions and Trillions of Quantitative easing and the BOJ and the ECB are still exceptionally accommodative... while the trend to automation, Machine learning, deep learning, and AI enable more to be done with fewer people.... thus the labor shortage problem and the absence of a broader swath of wage push inflation. John

To: Don Green who wrote (20312)	11/8/2017 4:16:39 PM
From: The Ox	2 Recommendations Recommended By Don Green John Pitera Read Replies (2) \| Respond to of 33421

An observation/IMO, Many of the overbought and oversold indicators approach extreme readings but rarely get to the point where the systems would start to reverse positions. Steam builds up in the pot, so to speak, but gets let out before there's a reason to boil over or, worse, explode. Looking at the combination of settings on multiple time frames within these SPY charts in different time frames show how often the pot starts to boil but then eases back down to a simmer (to continue with the cooking metaphor). As long as this process continues, the chances of VIX "blowing up" and causing a short stampede appears to be small. The longer it takes for us to see a significant "black swan" pop up out of the blue, the more confident the "short VIX crowd" grows. Even in the situation where we have a goldilocks economic environment of not too hot or too cold, at some point there will be a situation where it will be wise to "preserve capital" vs. "continued risk taking". I believe it's wise not to call tops or bottoms in advance of the move but rather to look for the proper indicators to start lining up. Also, many get hurt at the very end of risk taking phase, as they will likely get caught being overconfident and overextended. What all of this leads up to is a market that has essentially sustained itself through cannibalizing on itself, binging on cheap credit to finance trillions of dollars of stock buybacks, even as these same companies barely improved their productivity at all. I see lots of statements similar to this one. I'm sure there are quite a few companies that will fit this description but I'm not so sure that it's appropriate to paint the entire equity market with this same brush!