So it looks like a lot of stocks sitting right near (just below/just above) resistance levels - and everyone sitting on their hands until Tuesday.
Everyone is just anticipating what the other person will do... longs assume bears are all in, and 'everyone' assumes a drop will come post Fed, so long is the way to go. Shorts assume bulls are all in, expecting a huge rally off of a cut, so short is the way to go. The charts are of no help - all the major indexes save Russell 2000 are also sitting right at (literally to the point) on support/resistance. It's just a bunch of waiting at this time. I will be taking a little short exposure off just because this market is completely 50/50 - while economic logic would imply 1 direction the last thing one wants to do is give the market the benefit of the doubt in regards to logic ;)
There are so many ways to read this
- Everyone anticipates a huge move up or down, so the market will go nowhere and have muted reaction
- The market is lulling the longs to sleep, right now people feel pretty safe that the Fed will fix things, and bad news is being ignored (always a bullish sign) so this will draw in even more reluctant people from the sidelines (who don't want to miss a huge move up).... right when bulls wade in, in scale the market will drop them with a quick massive body blow when they least expect it.
- The complete opposite viewpoint to the one right above on the long side.
No positions
3 comments:
Easy! you just need some kind of Straddle-Strangle combination on the whole market...yeah.
Who knows. Except for funds I have tied up in speculative positions awaiting news, I'm mostly cash at this point.
The reaction is too hard to predict.
A 25 point cut? Some will think it's too little, others will think it's too much, others will think it's already priced in, others will jump for joy.
A 50 point cut? Some will be hyper-excited, others will be excited and then realize something must be really bad, others will think more will come, others will think that's it for the year, others will think it's great until they ponder about the ramifications.
No cut? Some will see nothing but gloom and hopelessness, others will see a strong standing, the status quo (as it has been lately) continues.
The big question is how many people in a given reaction group make big moves before the others. If enough people with negative sentiment can move the market, many with previously positive sentiment might shift - and vice versa also.
Anyway who knows.
By the way, do you trade options? I haven't seen you mention it.
Well I can't trade option here obviously and to be blunt after making a ton of money being long NASDAQ stocks (naked calls) then losing just about all of it buying... more naked calls in 2001, I have retrenched. hah. But I used them extremely aggressively and they seem to more commonly be used as insurance than how I used them.
Yes I think Tuesday everyone will be looking around on word of the 'whatever' news - as you said, ANY scenario can be construed as positive, negative, or neutral. Just depends what side of the bed the computers wake up that morning.
While I am bearish on the domestic economy, I would just prefer to see a swoop down, relatively serious one, a come to Jesus meeting, and then we can continue up in 6 weeks. What is the tricky part here is we enter preannouncement and earnings season post Fed. I also anticipate these financial companies reporting next Tue-Thu to gloss over all the bad news. Basically this is the way of corporate America. So even if things are worse than they are, they have such complicated balance sheets with so many moving parts - it will be impossible to really figure things out. I think you will start hearing a lot of 'off balance' sheet items - remember thats what the tech bubble/Enron/Worldcom era was all about. But to keep the party going I assume we will pull out all the stops. I have an interesting article I will post later on with some interesting comments related to this re: what central bankers (aside from the UK central bank) is doing, essentially flooding the system with cash behind the scenes - for purposes of banks to lend, but instead they are sitting on it or doling it out to ... equities. Keeping equities afloat. Oh boy. Yet another bubble - they never cease.
If you look and put/call ratios on things like Washington Mutual, Citibank or even ETFs like XLF, you'll see the put/call ration pretty even. There is heaving betting the banks will go up or they'll go down so I don't think people really know what the fed will do tomorrow.
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