Big Week Coming?

Well the indexes just could not reverse the down action of the previous week and now must wait to see if the Fed can provide continued comfort. The two reasons for the overall support for the markets, it is explained on television, is liquidity and global growth. The first is represented by giddy types like Maria ' let them eat cake' Bartiromo laughing at the downside because, as she knows, markets never will go down as long as her checks keep clearing. The latter support explanation is of coarse the never ending supply of money created by global growth and the ever weakening dollar. Global growth really means China, and there so many Chinaman. Do the math. Let's face it, these markets will never ever go lower. Gold, oil, and every other commodity have entered zero gravity and wealth is a forgone conclusion. Well, until it goes down.

Go Deep, Then Stop

Well, we did warn you. Lousy index action after the recovery of the August downturn has resulted in another index meltdown. This coming week's action will have great liquidation potential and may, if low enough, put in a low that the forth quarter that the bears will have to live with. Bond futures topping this week, oddly enough with most commodities, will have the markets looking for re-tests next week to the high ground from which they will fall. Some may of coarse, with the exception of the stock indexes which may find it hard to generate much upside interest in the next sixty days.

Any Which Way

The heads are putting their spin on data for the final quarter. The argument over the real amount liquidity the Fed is providing is making guys like Gross of Pimco jaw about treacherous banking conditions. Ever since the rate cut the treasury futures have been heading south. Gross needs continued Fed easing for his current positions to work. John Hussman of Hussman Funds explains that the Fed has added virtually no reserves. Maybe that is why Gross is worried.
The miraculous recovery of the stock markets have allowed them to catch-up to the market performance of models known to consistently out perform the indexes. Hedge funds are piling in and buying from willing sellers who only a month ago thought they had missed their chance to get out at a decent price. These markets are running on upside energy and while that will of coarse end badly, it makes it more interesting for traders. We all want to be short when it fails, but the upside idiocy creates great opportunities daily to trade both sides.

Bull Fish

DJI, SP500, and NQ100 knee-jerked a rally today after Fed minutes release. Pumping up the balloon continues despite the chances of another Fed cut seem unlikely. Various hedge managers are calling for substantial gains in stock prices over the balance of the year, but listening to them will not increase your IQ. These markets are tremendously overbought, but bubbles are always resistant to rational thought. Data the rest of the week is mild and will likely be viewed supportive regardless. Let the bull fish run with the bait.

Indexes Smell

Back on September 10th we wrote about the bears inability to establish a downtrend. A Fed that is easily fooled and a buyside machine currently meeting little resistance while flying the global growth flag has the bear thinking ugh. But this market behaves oddly. Much like the ' new economy ' reasoning leading up to the tech bubble, the global growth rationale seems to have the same bad smell. Whenever the market is in bed with surging commodity prices, which are often used as evidence as to the validity of global growth, one has to wonder how long this party will last. The DJI, SP500, and NQ100 have had manic action ranging from the depths of a supposed global credit crisis on August 16th, to new highs in two of the three indexes last week. Whatever joy the bull believes waits ahead may be short lived given the current market construct.