Thursday, January 13, 2011

Amazing Statistic and Why Those who Use History or Mean Reversion are Being Smashed by the Bernanke Put

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"Rev Shark" at Realmoney.com posted an amazing statistic which I believe he found at sentimenttrader.com.

According to Sentimentrader.com, the S&P 500 has now gone 92 days without closing below its 50-day moving average. That has only happened 17 times since 1928. But what is really amazing is that over the past 30 days, we haven't closed below the 10-day moving average even once. That has never happened in the last 82 years of market history

As I've stated multiple times it is not the rally we are experiencing that is strange, it is the total inability to pullback at any point that is boggling to anyone who has more than 6 months of market history under their belt.  


Don't forget in September and October we did not close below the 13 day moving average for 2 months in a row.  Indeed other than a hiccup caused by Ireland we might be working on the 5th month of no pullbacks.

This is an abnormal market.  Anyone using historical context to trade, is lost at sea.  Congratulations to Mr. Brian Sack, the Bernank, and his POMO crew for making a mockery of traditional somewhat 'free' markets.

Nevertheless, balance sheet policy can still lower longer-term borrowing costs for many households and businesses, and it adds to household wealth by keeping asset prices higher than they otherwise would be.

Amen Brian.  In the future I'd just eliminate the middle man (primary dealers) and just buy SPY futures directly on a daily basis, much more efficient than our current charade.  Granted that removes the Wizard of Oz effect (don't look behind the curtain - it's magic), but at least it would be intellectually honest.  (I know, I know - primary dealers don't "buy stock directly" blah blah)   [Jan 6, 2010: Charles Biderman of TrimTabs Claims US Government Supporting Stock Market]


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