Friday, March 18, 2016

Oct-Nov 2015 Carbon Copy

This market likes to repeat itself.  It dives after a period of complacency, forms a double bottom, as bears are all over the place, and then rallies nonstop for 1 month, crushing all the shorts and then flattens out.  We are done in the rallying nonstop for 1 month phase of this cycle.

Now we will have short sellers blaming the Fed for their bad trading, saying they have no credibility.  If you believe what the Fed tells you about rate hikes, then you are the sucker.  You haven't learned a thing over the past 7 years about how the Fed operates.  How many times have they "surprised" with being dovish?  Over 90%.  I like those odds when I play an unknown event.  Who are these knuckleheads who act like what Janet Yellen did is something new?  The BS unemployment and inflation targets  and forward guidance are changed to accomodate whatever easy money policy flavor of the day they choose.  Bernanke was even more blatant about it than Yellen.  They talk up the economy at the same time they keep the easy money flowing.  They talk tough about future rate hikes, but when it comes time to raise rates, they find excuses to delay.  Always excuses to give the market what it wants.  More easy money.

It is going to be a dreadful trading environment for the next few weeks, if the market plays like I expect.  Which is a flattening out of this up trend, like November 2015, and then sideways trade before the next dive lower.  Buy bonds.  They will go higher and we will be making all time lows in 10 year yields when China begins to meltdown and devalues their yuan.  German Bunds will go to negative yields.  Its almost there right now.  0.2%.  Japanese 10 years are already well into negative yields, at -0.13%.

SPX should test the 2070-2080 zone before we finally top out.  This market is not about fundamentals.  It is just one giant screw the shorts market.  One big pain trade on the short sellers.  I heard that guy, Rich Ross on Fast Money on Wednesday say he would throw in the towel on his bearish outlook and get bullish if SPX went above 2070.  Book it.

No comments: