Tuesday, October 5, 2010

A Close over S&P 1150 Would be Constructive

Coming into today the S&P 500 had touched S&P 1150 intraday seven of the previous eleven sessions, before retreating (only on one occasion did the index burst through on the charge higher premarket Thursday).  Obviously a key level in this market and closely watched by both carbon based life forms as well as silicon.  Since everyone is now a momentum trader, buyers will be found over 1150 and sellers below 1131 or 1116.  A close above 1150 would embolden bulls and give credence to a push to 1170 which has a Fibonacci chance of marking the top of this move. [Why S&P 1170 Would be a Perfect Fit as the Ultimate High]

ISM Services came in "better than expected" and the "you can have it both ways" market continues.  Good news = good news, and bad news doesn't matter because it means QE.   The Bernanke Fed likes to set the groundwork for what they are doing in speeches and based on what has been said the past 4-5 days by Bernanke and minions QE2 is now "in the bag" November 3rd.  So even if economic news was splendid from here on out, Bernanke has his Iraq in sites and will find weapons of mass destruction somewhere so he can devalue the dollar and we can all prosper.

From last evening:

  • Federal Reserve Chairman Ben Bernanke said Monday he believes further asset purchases by the central bank could help the economy, a signal that the Fed is likely to make the move if the economic outlook remains weak.
  • Speaking to college students, Mr. Bernanke said that even after the Fed cut short-term interest rates nearly to zero, it was able to lift the economy by buying $1.7 trillion of U.S. Treasury and mortgage-backed bonds in what he described as an "effective program."  "Additional purchases have the ability to ease financial conditions," he said.

What needs to be stressed in all the debate of what QE does or does not really do (I've outlined my views on how little it affects the real economy and how it is all about goosing asset values, punishing savers, and pushing people into risk assets) - all that matters in the near term is perception.  If the majority believe QE2 will move up commodities and stocks they will act on that, and it will self reinforce.  Just as a 200 day moving average means something on a chart when in truth its a totally arbitrary marker.  Analyzing if it is true or not, is more of an academic study in the near term - the herd believes it to be true, so it is effectively true as Bernanke is herding the lemmings.

And you thought the stock market had something to do with earnings, revenue, market share, or valuation?  Haha.  It's the Wizard of Oz behind the curtain... now dance speculators... dance!

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