That was quite the uppercut from Powell to the jaw of the bulls. The market was expecting a bit more optionality on stopping the balance sheet runoff but he blew that out the window dismissing the question with the word autopilot. In a normal market, the reaction would have been subdued. But this is a super nervous market in the middle of a waterfall decline. Any slighht hint of hawkishness was going to cause massive selling. Plus the expectations were too dovish, especially considering that the Fed is backwards looking and the data still hasn’t deteriorated in the US.
Unfortunately, I got back in too quickly after selling on the run up to the meeting, and am stuck with the long at bad levels. But today’s price action, volume, and put activity is typical of a flush out bottom. I am not sanguine about the markets like a lot of deluded bulls and underwater longs. I know I will have to get out on any year end rally and will do so if Santa happens to show up next week. I expect further selling in January, so I will not be overstaying my welcome on the lomg side. Really best case scenario now is a move back up to 2600, but more realistically, a target between 2550-2580 is more likely. Get out of this bad trade next week and move on to the next one.
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4 comments:
Trump has shown again his biggest enemy is himself. His stupid bias not only hurts him but now regular people. Had he been able to see past the bias of not trusting a short old woman he would not have replaced her with this clown Powell
Now is not a time for finding scapegoats. If you want to profit in 2019, you can't blow up on the way down. We will selloff more in January heading into earnings announcements which are going to be horrible. Most will not buy ahead of those numbers.
The easy money will be made on the short side next year, which is really where I am more comfortable because its a lot less crowded.
Now expecting January to be the dead cat bounce month. We should be able to exit our positions with a profit. We will now have to count on the largest snap back from a decline in 10 years because of the rapid descent of this move. Either that or we continue to crash and head down to 2000 and blow up for good. I think this move has rivaled the one we had in 2008. However banks aren't collapsing at the moment so this doesn't make as much sense to me. Simple irrational emotional selling from people who still remember 2008 and trying to compare this economy with that one. Market should be able to get its sense back together and realize wtf were we selling for. Earnings will have to help, and as long as they come in reasonably good, we will hope that January is a snap back month. I think retail will help. Maybe Trump will fire Powell soon and there is other chatter about not raising rates any more. I don't buy the narrative that the Fed is going to achieve its objective of stamping out demand by getting people jobless and homeless.
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