Jump to content



Photo

Liquidity Update


  • Please log in to reply
5 replies to this topic

#1 arbman

arbman

    Quant

  • Traders-Talk User
  • 19,504 posts

Posted 02 January 2007 - 01:36 AM

I updated my liquidity picture that I posted some time ago here. A top here might come in earlier in this round because the borrowing was more expensive and the credit growth (rate) did not grow as fast as the previous IT rallies.

Posted Image


So, I am looking for an IT top after January to mid Feb and I expect the IT top to be in after the middle of February to early March, it is unlikely that we should see an IT top while there is still money flowing into the markets over the next 2-3 wks. However, if we see the credit growth reversing back up, the decline should not last much further beyond than March or early April...

The dealers are also heavily borrowing, this is similar to the topping phase from the early last year, we should see higher prices in this trading range, the bias appears to be for higher prices for January first. The tech sector is due a bounce here, although another small wave of selling might come later this week...

Posted Image


We have now some more evidence in the prices that an IT top is approaching in the weeks ahead due to the underperformance of the small caps, I find the participants more and more speculating for the upside while the OEX options are rather getting inversely positioned...

Posted Image


Although there is a divergence in the IT rally in between the large and small caps, the divergence is not similar to 1997-2001 period. So, I do not expect a large decline or correction to turn into a bear market right from here...

Posted Image


- kisa

Edited by kisacik, 02 January 2007 - 01:39 AM.


#2 redfoliage2

redfoliage2

    Member

  • Traders-Talk User
  • 17,943 posts

Posted 02 January 2007 - 08:02 AM

I updated my liquidity picture that I posted some time ago here. A top here might come in earlier in this round because the borrowing was more expensive and the credit growth (rate) did not grow as fast as the previous IT rallies.

Posted Image


So, I am looking for an IT top after January to mid Feb and I expect the IT top to be in after the middle of February to early March, it is unlikely that we should see an IT top while there is still money flowing into the markets over the next 2-3 wks. However, if we see the credit growth reversing back up, the decline should not last much further beyond than March or early April...

The dealers are also heavily borrowing, this is similar to the topping phase from the early last year, we should see higher prices in this trading range, the bias appears to be for higher prices for January first. The tech sector is due a bounce here, although another small wave of selling might come later this week...

Posted Image


We have now some more evidence in the prices that an IT top is approaching in the weeks ahead due to the underperformance of the small caps, I find the participants more and more speculating for the upside while the OEX options are rather getting inversely positioned...

Posted Image


Although there is a divergence in the IT rally in between the large and small caps, the divergence is not similar to 1997-2001 period. So, I do not expect a large decline or correction to turn into a bear market right from here...

Posted Image


- kisa

The Fed certainly got the USD tanking after huge M3 liquidity in the last 6 months. With USD tanking rates are going up and TNX broke up. With higher rates fewer dealers will be borrowing. :sweatingbullets:

#3 redfoliage2

redfoliage2

    Member

  • Traders-Talk User
  • 17,943 posts

Posted 02 January 2007 - 08:18 AM

Rates broke up:
http://stockcharts.com/c-sc/sc?s=$TNX&p=D&b=5&g=0&i=0&r=9658.png

#4 arbman

arbman

    Quant

  • Traders-Talk User
  • 19,504 posts

Posted 02 January 2007 - 11:14 AM

Yes, certainly there is an aweful bear market coming, but by the time it comes, the indices are probably going to be 15-20% higher in about 2-3 yrs. The volatility should increase, the small caps lag and the fewer quality tech issues should participate only. It is very early to expect straight down from here for several years altough I strongly doubt that a 1998-2001 style tech blow off is in the cards again in this decade, so probably we should see the resource issues leading in the years ahead. The last bull rise will probably come when the rates go lower, but the currency has to stabilize first. I think another trip lower by the USD and the indices together will show their strength. I expect them to happen during the first half of 2007. A straight up rally from here with the continued divergence in the breath would bring a sudden crash and possibly a worse bear market around the summer. I do not expect that to happen (yet)...

- kisa


PS. I see that imageshack server is having trouble in displaying the credit growth chart I uploaded. The complete path was...

http://img411.images...192/bkcrnv2.png

If the particular server (img411) died, I will post the chart again on a different server...

#5 Cirrus

Cirrus

    Member

  • TT Patron+
  • 5,735 posts

Posted 03 January 2007 - 10:20 AM

Yes, certainly there is an aweful bear market coming, but by the time it comes, the indices are probably going to be 15-20% higher in about 2-3 yrs. The volatility should increase, the small caps lag and the fewer quality tech issues should participate only. It is very early to expect straight down from here for several years altough I strongly doubt that a 1998-2001 style tech blow off is in the cards again in this decade, so probably we should see the resource issues leading in the years ahead. The last bull rise will probably come when the rates go lower, but the currency has to stabilize first. I think another trip lower by the USD and the indices together will show their strength. I expect them to happen during the first half of 2007. A straight up rally from here with the continued divergence in the breath would bring a sudden crash and possibly a worse bear market around the summer. I do not expect that to happen (yet)...

- kisa


PS. I see that imageshack server is having trouble in displaying the credit growth chart I uploaded. The complete path was...

http://img411.images...192/bkcrnv2.png

If the particular server (img411) died, I will post the chart again on a different server...


kisa,

Your posts are much appreciated. This assessment of things seems pretty good.

#6 maineman

maineman

    maineman

  • Traders-Talk User
  • 1,987 posts

Posted 03 January 2007 - 10:32 AM

The thing to remember about liquidity: "They" have much, much more money than you do.... mm
He who laughs laughs laughs laughs.

My Blog -Maineman Market Advice