Friday, September 9, 2016

USS CB Battleship Sinking

The USS CB (central bank) ship is running into some icebergs.  First it was the hawkish words from the Fed at Jackson Hole.  Then rumors of the BOJ pulling back from buying more long term bonds, wanting a steeper yield curve.  And then yesterday, with Draghi not delivering on more QE promises because Brexit was a huge nothing-burger.

That is what it takes to finally crack this boring market.  The old saying that the first pullback after a long rally is usually buyable.  I agree.  I haven't bought anything yet, but if the ES can get to the break out area at 2120, I will be interested in buying for a move back higher on a Fed that will delay their rate hike till after the election and if the S&P is above 2180.   Remember, the Fed doesn't like to talk tough if the S&P is weakening.  They also have some excuses with weaker than expected nonfarm payrolls and ISM numbers.

The bond market is trading with the stock market these days, with a highly positive correlation.  That is not common for extended periods of time.  The market has sniffed out that corporations need low interest rates to continue issuing corporate bonds at will in order to do wild and overvalued acquisitions and stock buybacks.

I am waiting for one more push lower next week, and then will enter into some buys.  Finally the bit of action which I have waited for.

9 comments:

MM111 said...

This looks pretty bad...

Market Owl said...

Always looks bad near the bottom. Not much downside from here, but will wait till 2120 to enter long.

MM111 said...

Bounce or straight down?

Market Owl said...

I will say we bounce into close on short covering. We're not yet in the straight down phase.

MM111 said...

I think this really wants to go down. Close at new low and then gap down Monday.

MM111 said...

Bingo!

Market Owl said...

That was a savage close. Right at support to close out the day. Its getting interesting again.

MM111 said...

You think we bounce next week after such a savage down day?

Market Owl said...

Yes, we should bounce from this level. I see at most 20 points downside and 50 points upside within next 2 weeks.