Tuesday, December 9, 2014

Buying this Dip

We got China plunging after surging for the past several days, on tighter liquidity conditions.  The Chinese officials have no idea what to do.  They cut rates one day, and tighten liquidity by imposing stricter rules on loans.  I guess if the market is up, they will tighten.  If market is weak, they will ease.  This is on a day to day basis!  The central bankers are just stock jockeys now.  They are slaves to the market.  If the market is down, it's time to ease.  If the market enters bubble territory, talk it down but don't do anything (don't dare tighten) until the bubble gets out of control.

Anyway, this S&P is quite weak today, and Europe is weak as it usually is.  I have bought the dip in premarket, although a bit higher than current levels.  It is a swing trade.  The forces for stock prices are up.  You need much higher rates or another crisis/recession to bring this market down for good.  We have neither.  The Chinese have shown us their cards, and they are going to be leaning towards the easing camp.  The ECB QE is inevitable.  The Fed will be late raising rates, like they always are.   Positive for risk assets for the next 2 months, till we reach true bubble territory.

We are beyond the up thrust stage, so there will be short term down days mixed in with up days, it will no longer be 90% up days like before.  But the market environment is benign.  In these markets, you have to lean long.

Bonds look like they are reaching for a climax top here.  My view is for a higher stock market, under that scenario, bonds are likely lower and sustainably so for the next two months.  We have reached the near limits for Bunds to push Treasuries lower, and I doubt Treasuries have the inherent strength to go higher on its own with rising equities.  Bearish Treasuries here.


Anonymous said...

Hey is it time to buy some oil yet?

Market Owl said...

Getting closer to a bounce but I would rather wait for a bit longer. I don't think we bounce much anyway so I would rather get in lower.

MM111 said...

Looks weak. Europe looks weak too. Are you still expecting more up or maybe we have now topped out?

Market Owl said...

More up.