August 10th, 2010
Were you hooked all day waiting for the Fed announcement? If not, don’t worry because I was watching and waiting for you. I learned that, as far as the market was concerned, it was pretty anticlimatic. The market was down over a percentage point all day but then the announcement came, the talking heads began attempting to sort it all out and give their professional opinions of what it all meant for the economy, for the dollar, for commodities and for the market. A checkerboard of 6 talking heads and each head had its own professional, studied opinion and point of view.
I’m not an economist (actually remember I was lucky enough to get a C in the course in college; boring!) so I’ll restrict my comments to what I know and like best, the stock market from a technician’s perspective. What I see are still two diametrically opposing points of view:on the one hand the market is on the precipice and about to dive another 50% from current levels and on the other hand we’re at the end of what can be considered a long consolidation, a gestation period recovering from the bounce off the bottom last March 9 before launching the next leg up.
The Bears continue to focus on that mega-head-and-shoulder top with a neckline somewhere around – well you pick, either 1050 or 1015:
Some perma-Bears see this formation and stock up on short positions the same way as those guys walking around with billboards saying “The End Is Near” might store can food, water, flashlights and a battery operated radio in their basement (or will an iPad do just as well now). I’ll grant that it looks pretty ominous and, to that end, I still have 45% of my money in cash. We may not understand or like, if we do get it, what we see come out of the Fed, Congress or the Executive but are we still on the verge of going into (G)reat (D)epression II?
But here’s another view, perhaps a more cautiously optimistic one. The sharp recovery (some might say for unfounded reasons) starting with the Generational Low on March 9, 2009 and peaking in April. A resistance trendline connecting the 2007 peak with the April high (true, 2 pivots make for a weak trendline). Finally, what might be considered a channel tacked to the bottom of the descending trendline the market is trying to break above.
If you’re of this persuasion you’re encouraged by the Bull’s strength that seems to be building underneath the market. This is where the excitement really is:
Will it be the mid-term election and the prospect of a significant change in Congress? Will it be the decline in the $US that dispels the notion of deflation and, finally, turns everyone’s head towards a welcomed concern about inflation. It’s not a prediction and it may be only some wishful and hopeful thinking. But I confess, I’m just rooting for the Bulls to win this face-off.