Tuesday, May 05, 2009

S&P 500 - Pin The Tail On The Donkey

We said there were no signs of a rally all throughout 2008's decline. Even as trader and Wall Street personality time after time called for one. And, there wasn't one. There were small pulses of counter trend moves but that's it. This is a rally in both price and time. And, we said one was likely coming. It is upon us. The fact that this is such a low volatility move and price has therefore been contained in such a tight technical channel tells us this move is purely driven by traders manipulating the market courtesy of the Federal Reserve reliquifying financial markets. But, then that's what we said was happening.

With a reliquification we should expect more of the same behavior that got us into this mess. An attempt to restart securitization, Wall Street banks gambling in financial and commodity markets, more home loans to people that shouldn't be receiving them, more private equity stupidity and more mergers and acquisitions souring the balance sheets of the acquiring firms and saddling businesses with debts that will either hamper future earnings or even lead to bankruptcy. And many of other generally asinine Ponzinomics that put us in this mess. And, the end result will also be the same. Because the government and Federal Reserve refuse to acknowledge that this isn't a liquidity crisis, we will see future liquidity shocks and more financial crises. The government is making the mess worse. But, then we sound like a parrot on this point as well. Maybe the Wall Street savants cited in the earlier post today might consider these points when they start gloating that Wall Street is returning to pre-crisis form. I truly despise incompetence masking as brilliance. If you don't know what the hell you are talking about, be smart enough to acknowledge it. Blabbering bullshit about Wall Street returning to its prior form is just plain incompetence. And ignorance.

Liquidity-driven rallies can last a long time. We saw one from 2003 to 2007. This one won't last that long and it won't rise that high. But, until we see the pool of money thrown at markets starting to recede again, we'll have a reasonably bouyant financial market. How long is that? It's a pure guess but there are ways to fence it. But, that's too complicated for a free blog.

I'm going to stick my foot in my mouth and state that this pattern has been violated and a new micro pattern shown in red has developed. This pattern is an even lower volatility pattern that is pointing to potential price exhaustion. Traders want to pin the tail on the donkey at S&P 920-ish where there remains an open gap in the S&P so we'll see if we get there. Yes, it's all a game. A very serious one but still a game being played with your money.

Regardless, the calls of this being an economic turning point are beyond ridiculous.

posted by TimingLogic at 11:44 AM