Just a quick post to remind you all of the importance of the 1100-1120 range. The markets are getting pummeled today, down 40 handles on the S&P.
There is a head and shoulders developing, right after the July-Aug H&S. 1120 and 1100 are major support lines that appear poised to crumble and the VIX is close to breaking out.
So far, the market has behaved almost exactly as predicted in my thesis of late August. Please refer to my post below for a recap:
Rally Has Been Unconvincing
I agree that we are about to breakdown. EM's have already started the second leg down. I have been wanting to short this market for awhile now but haven't had the guts to pull the trigger. I was thinking of putting the short on if we break support.
ReplyDeletePhew that was an ugly tape wasn't it? When do you think the economy finally turns around? I'm short but want this recession over!
ReplyDeleteI don't see the economy turning around any time soon. What we need right now is more government spending on stimulis but there is no appetite right now for that. We should be taking advantage of these low borrowing costs to borrow much more money and stimulate the economy. The bond markets are telling us to spend for growth.
ReplyDeleteTo top it all off, the politicos are now going after Ben Bernanke for trying to stimulate. I believe we are repeating the mistakes of the 1937-1938 era when we tightened monetary policy exactly at the wrong time sending us back into a recession.
Dysfunctional government is going to ensure either a no growth or even contractionary economy for the forseeable future.
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ReplyDeleteInteresting theory, friend. Bernanke is in his heart an inflationist...he was a student of The Great Depression and wrote that shutting off the money spigot made a bad situation worse. But he is, after all, an appointed government official and might forget his beliefs if he wants to keep his job. On top of political pressure, stimulus to this point hasn't worked. You're probably right.
ReplyDeleteI think we're at the point finally of choosing either hyperinflation or depression. I think the next few months will be a tipping point in American history.
Kind of scared to look at my stocks at the moment.
ReplyDeleteIt's hard to argue about what would have happened had there not been stimulis, but I would say things would be much worse.
ReplyDeleteWhen 10 years are below 2 pct and 30 yrs below 3 pct, people are clamoring for US bonds, let's give it to them I say!
QE may not have worked but stimulis sure did! Government spending kept the recovery going for the past two years as corporations and individuals delevered. When stimulis ran out is when the economy started stalling. Austerity is going to kill the economy like it's doing now in Europe.
The problems are made much worse because governments only act in a reactionary way. They never step in to prevent the bubbles from inflating in the first place, but once it bursts THEN they get austere when the economy does need a little TLC. Ass backwards.
ReplyDelete