21 replies to this topic

[dTraderB]

Is The Fed Losing The Thread? What May Lie Ahead

 

Summary

The Fed stood pat Thursday, but equity markets sold off.

Official commentary from the Street could not explain the (mild) sell-off.

I present a possible rationale: perhaps the Fed is already too tight and should, therefore, sit tight.

It's raining on one side of the street, but the Fed only sees the sunny side

Stock markets reacted badly Thursday to the Federal Open Market Committee's statement, even though Zero Hedge - a haven for short-sellers, gold bugs, and gloom-and-doom purveyors - reported as follows:

While there were virtually no surprises in today's FOMC statement - at least relative to expectations, with Goldman's redline statement laid out earlier a carbon copy of what the Fed eventually published - the oddly hawkish market reaction suggests that the Fed did in fact say something that was unexpected...

https://seekingalpha...d-may-lie-ahead

 

[dTraderB]

Bullish tone to early market action, but choppy.....two NQ trades so far.

 

I think there will be a pitched battle today, possibly tomorrow also, and the winner will rule for a few days or even weeks....

 

Holger Zschaepitz‏ @Schuldensuehner 5h5 hours ago

More

Global mkts have started the week on a pos note w/China trading higher, shrugging off leads from weak US session on Fri. #Oil jumps after OPEC inches closer to supply cuts. Pound slides below 1.29 as #Brexit turmoil deepens. With it being Veterans Day in US, US bond mkt is closed

 

 

More

Global mkts have started the week on a pos note w/China trading higher, shrugging off leads from weak US session on Fri. #Oil jumps after OPEC inches closer to supply cuts. Pound slides below 1.29 as #Brexit turmoil deepens. With it being Veterans Day in US, US bond mkt is closed

[dTraderB]

The bear case:

 

Summary

There’s very real possibility of a global recession in the next six months.

The three most likely triggers are corporate debt, a trade war, and a slowdown in Europe.

I highly suggest building a cash reserve, deleverage as much as possible, and have a plan for your long-term investments.

There's very real possibility the global economy breaks down in the next six months. Anything could trigger a crisis, and it could well be something no one now foresees. But here are my three candidates.

https://seekingalpha...ush-sell-crisis

 

[dTraderB]

another bearish case. 

I think in 2019....but except for 3 to 5% declines, do not see any major crash froml late November to end of 2018. The crash window will be closing in a week or two

 

Conclusion

The tailwinds that existed for the market over the last couple of years from tax cuts, to natural disasters, to support from Central Banks have now all run their course.

The backdrop of the market currently is vastly different than it was during the "taper tantrum" in 2015-2016, or during the corrections following the end of QE1 and QE2. In those previous cases, the Federal Reserve was directly injecting liquidity and managing expectations of long-term accommodative support. Valuations had been through a fairly significant reversion, and expectations had been extinguished.

None of that support exists currently.

There is a reasonably high possibility the bull market that started in 2009 has ended. However, we will likely not know for certain until we get into 2019, but therein lies the biggest problem. Waiting for verification requires a greater destruction of capital than we are willing to endure.

We have already taken steps to reduce equity risk and will do more on rallies that fail to re-establish the previous bullish trends in the market. If I am right, the more conservative stance will protect capital in the short-term. The reduced volatility allows for a logical approach to further adjustments as the correction becomes more apparent. (The goal is not to be forced into a "panic selling" situation.)

If I am wrong, and the bull market resumes, we simply remove hedges and reallocate equity exposure. As I stated previously:

"There is little risk, in managing risk."

https://seekingalpha...-market-shifted

[dTraderB]

Market Facts

• About $3.6 billion flowed into global equity funds during the week ended Wednesday, while $5.5 billion went into bond funds, their first week of inflows in seven weeks, according to a Bank of America Merrill Lynch analysis of EPFR Global data. Analysts said flows picked up following Tuesday's midterm election results.

P&G and McDonald’s are powering the Dow’s rebound as investors are playing defense. Stocks of old-economy companies like Procter & Gamble and Walgreens Boots Alliance have surged in recent days, helping the Dow Jones Industrial Average move within striking distance of its 16th record of the year.

OPEC is moving closer to a production cut. The cartel is likely to agree to an oil production cut when it meets next month in Vienna as oil prices enter bear market territory and signs of oversupply loom. Saudi Arabia confirmed that it would cut its own oil supplies next month and Russia signaled that it could follow suit.

With retail earnings on tap, investors are expecting a tale of two worlds. Retailers’ fortunes have diverged in the wake of the financial crisis. Some have found ways to compete in an increasingly online world, while others are still finding their way—or fighting to stay alive.

SoftBank is targeting a $20 billion IPO for its Japanese mobile unit. The move comes as it seeks funds to fuel its nearly $100 billion investment machine.

Losses are piling up at fintech firm SoFi as rates rise. The San Francisco-based financial-technology startup lost money for the second consecutive quarter as loan volume sagged and the company spent big sums on expansion plans.

  What We've Heard on the Street

“So far, this fall’s biggest videogames are off to a strong start. But in today’s game business, that’s just not enough.”

—Heard on the Street columnist Dan Gallagher

 

[redfoliage2]

SPX near term downside target: 2730.

[dTraderB]

Closed remaining 2 QQQ puts

Flat 

 

Trading NQ  only.... until I am more confident about the market, seems to be in a transition phase.

 

Maybe I will trade VXX or crude also but not too keen on trading too many contracts now.

 

One last 2018 WHOOOSSSHHHHHHHHHHHHHHHH down?

[dTraderB]

Carl was right.... this may go all the way down to 2600 SPX 

It's a long way down but the selling has been relentless this morning.

 

NQ has been almost vertically down except for a period of consolidation after the first leg down

 

Trading NQ only

[dTraderB]

Crashing sounds... still some distance away but you can hear it....

 

Can the bulls hold it at SPX 2720? 

 

Will the PPT come to the rescue?

[dTraderB]

HEAVY SELLING! 

 

From where did this come ? 

 

Bulls must turn this around or else SPX 2600 handle will be here today...