Too Big to Flail
October 5, 2010
“Oh Baby, I, I, I, I’m Fa-a-a-allin’ I’m Fa-a-allin’ Fall, Fall, Fa-a-a-allin’ (Alicia Keys – 2001)
The market was falling today and it was falling in 2001 when Alicia recorded her song, but will today’s market action be the start of a more prolonged market correction ? Some market-strategists are calling for the resumption of the bear market very soon. One of the analysts leading the ‘bear-pack’ is Soc-Gens Albert Edwards. In his latest Global Strategy note he writes about the deteriorating technical condition that will take the market down again.
The market was falling today and it was falling in 2001 when Alicia recorded her song, but will today’s market action be the start of a more prolonged market correction ? Some market-strategists are calling for the resumption of the bear market very soon. One of the analysts leading the ‘bear-pack’ is Soc-Gens Albert Edwards. In his latest Global Strategy note he writes about the deteriorating technical condition that will take the market down again.
Mary Ann Bartels (BofA’s technical research analysts) is anticipating a 10-12% pullback in the Nasdaq based on the speculative positions built up in the last week of September. Apparently “Large speculators aggressively bought NDX futures last week to a net long of $3.2bln notional from $0.8bln notional previously.” A similar build-up last March was followed by a 10.2% correction in the Nasdaq.
With the US payroll data a couple of days away the market will look elsewhere for guidance and today it might very well be the BOJ all eyes are fixed on. It is believed the Bank of Japan will announce more aggressive Quantitative Easing to lower their currency versus the US Dollar (I mean they tried stimulating their economy through QE for the past 20 years and it did not work, so why would they expect a different outcome this time). Remember, the Yen is trading at an almost record high versus the USD and the Japanese ministry of Finance has already put pressure on the BOJ to act decisively. If fairytales exist and the BOJ comes with a QE-package no one in the marketplace is expecting, we could see the Yen weaken to perhaps as much as 90 versus the USD.
Today’s market action kept us within the well established trading range. I know I sound like a broken record, but what can I say, it’s kind of dull out there.
Dow -0.72% S&P -0.80% Nasdaq -1.11% EuroUSD 1.3690 WTI $81.45 Gold $1.315
Basic Materials led the S&P lower (-1.58%) while Telecoms were the best performers
(-0.06%)
What to expect today: more of the same I’m afraid. Dax & S&P are still within their trading ranges. The market could get some support from a lower Yen if the aforementioned QE materializes, but other than that I think everyone will wait patiently until the all important jobs numbers are out Friday. This will give the market some guidance as to if & when the FED will start their own version of QE-II – The Sequel. Unfortunately we all know that a sequel is seldom as good as the original and costs many times as much. And the original in this case wasn’t good to begin with in my opinion.
Happy Hunting & Let’s be Careful out there !!!
What to expect today: more of the same I’m afraid. Dax & S&P are still within their trading ranges. The market could get some support from a lower Yen if the aforementioned QE materializes, but other than that I think everyone will wait patiently until the all important jobs numbers are out Friday. This will give the market some guidance as to if & when the FED will start their own version of QE-II – The Sequel. Unfortunately we all know that a sequel is seldom as good as the original and costs many times as much. And the original in this case wasn’t good to begin with in my opinion.
Happy Hunting & Let’s be Careful out there !!!
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