Tuesday, October 11, 2016

Dump Out of the Blue

Hard dump on no news.  That is what happens when you have an overvalued market that is losing buying interest from corporations.  Stock buybacks and lower interest rates were the main driver for higher prices.  Both of those supports for the market are slowly dissipating.  We have a substantial reduction in buybacks from last year and interest rates are creeping higher.

On Monday, you had a bank holiday which was the perfect time for the junior traders to overreact to Trump's troubles and bid up the market on a likely Clinton win.

Interest rates are stubbornly sticking to higher levels despite a flat S&P, and the recent rhetoric from central banks is noticeably different than what it was earlier in the year.  Since we all know that the main driver for the rally since 2009 has been central bank action, it should come as no surprise that the market will get weaker when the central banks show their reluctance to continue with their insane policies.

I am looking for more weakness in the coming days, although it should be contained above 2100.  No position in the S&P at the moment.


MM111 said...

2128 not the bottom?

Market Owl said...

2128 is not the bottom. We will have to scare the bulls more than this. It doesn't help that we are in earnings buyback blackout period. So we won't be able to have a strong rally probably for another 2 weeks. I'm eyeing 2100 as a puke out level for longs which could be buyable.

Anonymous said...

Much success to you, even if you wish me the opposite.

Sooner or later we'll all see who the prophet is.