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Fed Ex Machina

Unless you are the lead dog, the view is always the same.

Spring Has Sprung:

Not only are we in the Spring season of the year, but the stock market action may be in what Richard D. Wyckoff ( the local Technicians' guru) called a "Spring" in stocks, where the Composite Operator ( those Evil controllers) try to shake weak hands out of the market before taking it higher. Using a Conspiracy Theory that the Composite Operator ( the "They") is the market manipulator, today's action seems to fit the duel between the Fed propping up the market and the Insiders ("legal") such as Board members and corporate officers selling at a huge pace - numbers can be found at my Sentiment blog: Today's whipsaw market action is an egregious exemplum of that.

Excerpting a couple quotes from the excellent reportage from John Mauldin (free) to his million or so friends at: -

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”–

Ludwig von Mises

“[Central banks are at] serious risk of exhausting the policy room for manoeuver over time.”– Jaime Caruana, General Manager of the Bank for International Settlements

Is there any doubt that the "Income Inequality" that Krugman and Reich bemoan is the result of banks, stocks and real estate benefiting from the Fed's Queasy, while the middle class relies more and more on the government?


As reported last week, a breach of 1875 in the S&P 500 (SPX) with heavy Volume might change the technical Resistance to a Support level as the market moves higher. Using a three-day close filter, this did not happen (yet).

Just as with Fundamental Analysis ( "markets drop on Ukraine fears", etc. ) there are more than a few Technical prognostications, also based on historical data, that do not come to fruition. One of the more reliable signals, however, is cycle data - based on behavior of traders/investors. When they occur 100% of the time, it is wise to take notice:

Since 1945 the average mid term election year (2014) sees stocks drop over 1/2% in May, and almost 2.5% in June (per S&P IQ data). The same year always sees a drop near the October periods. It is a fool's errand to predict the timing of markets exactly, but one prudent strategy (especially since I am going on vacation for a couple of weeks) would be to wait until some level of material correction happens, then sell a Put option - if one has option approval- on stocks they would like to own, such as dividend stocks. When stocks drop, the options USUALLY increase in value with the fear, making them more lucrative to sell (not buy). Some logical Technical "stairstep" correction areas on the SPX are 1820, 1770, and 1750. Below that - Katie bar the Door!

Sans option approval, one could just buy the stocks, possibly half of the desired position, then scale in later. After the mother of all Bull markets for the past 5 years, even if dividend stocks go sideways, the 3% or so beats the zero % in fixed income rates, which the Fed seems to extend indefinitely. Growth and earnings (true Fundamental stuff) do not seems to correlate with much higher prices, despite the Fed's QEs. One anecdotal stat I saw was we are in the worst EPS (earnings) cycle in 55 years, @ 2.8%.