20 replies to this topic

[arbman]

I think by the time everything gets said and done, there will be a rate cut or two. Any language change in the Fed should lead to a sell off to test the lows at a minimum. There is a risk to run out of liquidity by the Nov 2008 elections without a rate cut. The initial effect of the opening of the discount window (cheaper short term repos) will start to fade off soon, a few days before the Sep 18th FOMC meeting, also near the 5 wk cycle low... The 10 wk low is due at the end of Oct, probably a retest before a major rally into 2008. This is the optimistic scenario assuming that the credit growth will turn from here...

- kisa

[relax]

hi kisa, "effect of the discount rate" wasn't it just symbolic, that is there was no effect besides the psychological effect for the equity markets which factors are you looking at in terms of credit or the economy being hit because economic data from august has definitely not been so bad so far - of course we won't see the true effects until november i'm just still wondering how markets will react when fed does not lower rates at the meeting disappoint and then rally as "things aren't so bad" all this fundamental talk just seems to make everything confusing, after all the future direction of the market does not depend on fundamentals, but the markets perception of the them cheers

[ogm]

You say the leadership in energy means inflation more then growth..

I think differently.

There are 2 leaders.. Energy + large cap techs.

These aren't defensive sectors in nature. I think in this combination it means GROWTH.

Drop off in growth would've had energy going down, since the demand for energy is economicaly sensitive.
Here is a chart you might find interesting.... SPX vs FED's SOMA.

Notice the actual Fed's actions. They kept liquidity rather flat. Thats what caused the hiccup in the system.
As long as they pump, the system is fine and prices advance.

There is an article with that chart, but I think the guy who wrote it has completely misinterpreted everything

http://wallstreetexa.../winter/?p=1045

That article also includes the chart of a Baltic Dry index hitting all time highs. The demand for goods transportations is huge. Otherwise it wouldn't be there. Yes,t hat may be inflationary, but it also means growth.

[arbman]

I think there is more upside into Sep immediately, but... The effect of the discount window was to support the stressed financial sector, it doesn't have an enough lasting effect though to offset any deterioration due to the longer term changes in the money supply. The financials are not leading anymore... The energy should not lead so much early in the rallies, it didn't correct much. It is a late cycle sector, the energy is leading with a wide margin at the moment from the mid Aug lows. The small caps started to lag since last week unless this is another terminal rally... I would think that the next major pull back or decline will improve the lifespan of the rally. There is also no doubt in my mind that the internal low should now be in, however, the price lows will be most likely tested on various issues with the Q3 results as the market is coming out of a major low. The liquidity, the entire A/D momentum vs the price patterns look similar to the first half of 2004... Some ideas... - kisa

[LeroyB3]

Kisa, I looked through some past posts, but I couldn't find an explanation of your chart. Could you explain what the lines are and a bit about it? Thanks. Best, LB

[arbman]

Could you explain what the lines are and a bit about it?

1, 2.

[peregrine]

A shorter term view of the Feds activity also supports your view of a more liquid stance. While Total Bank Credit had been sliding downward for over a year...the current graph shows a double bottom and the start of a potential leg up.

Click on link; change date range block to 8-15-07: refresh chart in order to view.

http://research.stlo...2=Refresh Graph

[VolPivots]

A shorter term view of the Feds activity also supports your view of a more liquid stance. While Total Bank Credit had been sliding downward for over a year...the current graph shows a double bottom and the start of a potential leg up.

Click on link; change date range block to 8-15-07: refresh chart in order to view.

http://research.stlo...2=Refresh Graph

Thanks for the link. In ewave terms it looks like a terminal triangle....we just broke down through the lower TL of wedge

[ogm]

Thanks for the link. In ewave terms it looks like a terminal triangle....we just broke down through the lower TL of wedge

OMG Catastrophy ! TERMINAL Triangle. No less....

Care to overlay that chart on the S&P index ?

Edited by ogm, 04 September 2007 - 06:24 AM.

[OEXCHAOS]

i'm just still wondering how markets will react when fed does not lower rates at the meeting

disappoint and then rally as "things aren't so bad"

Why would you think that the Fed won't cut? The Fed fund futures, I'm told, are saying, with 90%+ certainty that the Fed will cut 0.25, and more later.

What do you think you're seeing that the smart guys who discount Fed actions aren't?