According to my risk summation system, the days this week with the highest risk of a turn in or acceleration of the current trend in the DJIA are Tuesday the 18th, Wednesday the 19th and Friday the 21st. This many peaks in the risk summation plot probably points to some sort of whipsaw affair this week, but the real muddle is at the front end of the week. This front end mess might resolve itself as a single end of the day Monday and Tuesday morning risk window, but at this point that is not clear.
Last week the risk summation system tagged a low at the beginning of the week and what looks like another low at the end of the week depending on the action this coming Tuesday.
I'm sure you've all heard that if you put frogs in a pan of tepid water and slowly bring it to a boil, the frogs will not jump out and perish. I suppose the real trick is knowing just how slowly to turn up the gas to prevent the frogs from sensing the danger. I for one think this is pure BS, but don't have a big enough sadistic streak to test it in real life. The FED is clearly sadistic, since they are doing exactly this in real time but instead of froggies, they're boiling the holders of treasury notes, and they just cranked up the gas setting another notch at the beginning of this new year as can be seen in the plot below. My crude slope lines show that they realized the boiling was going to take too long when they returned from the holidays and cranked up the heat a tad.
So far no serious panic has set in despite the interest rate temperature clearly rising, but this new faster rate might just be a step too far, only time will tell. The AD line below does indicate that quite a few fainter souls have been climbing out of the warming waters. Given that just about everyone has been forced to get into this pan of market water by the torturous low rates, if a rush to exit ever does develop, it won't be pretty.
Regards,
Douglas
