P&P portfoliowise, UYG is outta Work . . .

Hey Mack,

Hope your trading goes well. (and everything else, too)

Volatile markets, no?

My assessment of the markets: 1) Only fed or European corollaries will prevent a collapse of the markets. (whether short term oriented like last week, or longer term oriented like quantitative easing) 2) These actions will not produce the desired long term results. 3) Markets will have huge swings back and forth until Germany agrees to QE for ecb. (and at this point, I believe that will happen, just a matter of time)

So, the best play for the time being is to play the extremes of a range, which can be judged by most anybody familiar with charts.

Once the ecb determines to get serious with QE, upper range should be broken.

Of course, if Germany will not go with QE, markets collapse.

At this point, this is best I can see.

Steve

Point of clarification: QE will not have desired effects of producing jobs, but it will satisfy the markets and commodities for 6 mos to a year.

Howdy, Steve!

Hope your trading goes well. (and everything else, too)

Ditto! And thanks!

Volatile markets, no?

Yes, indeed. It is days like these when I feel my investment in years of market studies has been returned with interest.

My assessment of the markets: 1) Only fed or European corollaries will prevent a collapse of the markets. (whether short term oriented like last week, or longer term oriented like quantitative easing) 2) These actions will not produce the desired long term results. 3) Markets will have huge swings back and forth until Germany agrees to QE for ecb. (and at this point, I believe that will happen, just a matter of time)

I am in general accord with your assessment. However, I do differ on a couple of particular points, as follows:

1. I believe Germany already has agreed to a comparatively small amount of quantitative easing by the European Central Bank through the ECB's ongoing purchases of debt issued by Eurozone peripheral members like Greece, Italy, and Spain.

2. I also think Germany may agree to a relatively large amount of QE in the future. However, the primary agent for it may be not the ECB but the International Monetary Fund, as indicated in multiple reports by our droogies at Reuters, such as this one by Jan Strupczewski ("Lending to IMF from Eurozone Central Banks a Technical Issue Now, a Political Issue Later": http://tinyurl.com/6mftjg5). As we learned in Political Science 101, an approach of this nature would be in line with the old axiom: If you cannot solve the problem of the people with policy, then baffle 'em with bull----.

So, the best play for the time being is to play the extremes of a range

I agree -- absolutely, positively!

which can be judged by most anybody familiar with charts.

Well, as a multivariate analyst, I personally do not at any time employ only one form of analysis, even one as useful as technical analysis (i.e., I continue to conduct my economic, fundamental, and sentiment analyses, as well).

Once the ecb determines to get serious with QE, upper range should be broken.

Depending on the definition of upper range, I would either agree or disagree. In the case of the Standard & Poor's 500, I believe it is probable ECB/IMF-fueled QE on a massive scale could get the index above its current 52-week high level, but I think it is improbable the same impetus could get the index above its all-time high level.

Of course, if Germany will not go with QE, markets collapse.

Indeed.

At this point, this is best I can see.

You clearly have no need of spectacles!

Point of clarification: QE will not have desired effects of producing jobs

Obviously.

but it will satisfy the markets and commodities for 6 mos to a year.

To me, six months appears possible, but a year seems improbable: I mean, Mr. Market may be crazy, but the little manic-depressive ain't stupid!

Good luck!

MackTheKnife

Mack,

Thanks for the usual generous response. Your time is appreciated.

Well, as a multivariate analyst, I personally do not at any time employ only one form of analysis, even one as useful as technical analysis (i.e., I continue to conduct my economic, fundamental, and sentiment analyses, as well).

Fair enough. However, it does seem like the fed, IMF, ECB, et al seem to have their eye on the markets; particularly when they reach the bottom of the trading zone. Then they bring a short term bazooka. (or a pseudo bazooka)

At this point, about the only thing I can really count on is my daytrading. Some patterns are still reasonably reliable.

Thanks,
Steve

Howdy, Steve!

Thanks for the usual generous response.

My pleasure.

[I]t does seem like the fed, IMF, ECB, et al seem to have their eye on the markets; particularly when they reach the bottom of the trading zone. Then they bring a short term bazooka. (or a pseudo bazooka)*

Very true. And, recently, those efforts have been aided both by conditions in the options market and by seasonality. However, change is afoot in the former case, and Jan. 1 and Jan. 23 are coming in the latter case. Therefore, I believe the central banks may be functioning on their own little island after that last date (i.e., in Jawsspeak, they're going to need a bigger bazooka). Alas.

At this point, about the only thing I can really count on is my day trading. Some patterns are still reasonably reliable.

Also very true. Of course, my own market operations are focused more on short-term trading and less on day trading (i.e., to each his or her own).

Good luck!

MackTheKnife

*Speaking of the ECB, the whisper number is it will cut its key interest rate not by 25 basis points but by 50 bps on Thursday. (Jean-Claude Trichet is rolling over in his grave, and he ain't even dead yet!) To me, this means Mr. Market may be planning to take a dive in the event the ECB announces a cut of only 25 bps.

Hey Mack,

It is amusing to watch the EU leaders at work. Their last round just reinforces the idea that they will not do anything substantively until they have to. (That is to say that Germany will not.) It is a wonderment to watch the markets. Probable outcome is not the main thing; the hope of an unlikely event is. (at least for the short term) I suppose part of this is the fact that most major traders want a year end rally, and don't think (or care about) long term.

In any event, the targeted date for the next EU crisis is around end of Feb or March. I would be surprised if it is not sooner.

Good trading,
Steve

Howdy, Steve!

It is amusing to watch the EU leaders at work.

IMO, Elsa Fornero may be the only politician in the whole of the European Union who has an intelligent grasp of the situation (http://tinyurl.com/c8zbyyt).

Their last round just reinforces the idea that they will not do anything substantively until they have to. (That is to say that Germany will not.)

I believe the current EU leaders are an endangered species, so I think it is likely that most will not ever do anything substantive in the short time they have left, except possibly surrender their respective nations' sovereignty to the German idea. Which, in the majority of their cases, might not be the worst thing in the world.

It is a wonderment to watch the markets. Probable outcome is not the main thing; the hope of an unlikely event is. (at least for the short term) I suppose part of this is the fact that most major traders want a year end rally, and don't think (or care about) long term.

To paraphrase the eternally relevant Benjamin Graham: In the short term, the equity market acts like a voting machine, but in the long term, it behaves like a weighing machine.

In any event, the targeted date for the next EU crisis is around end of Feb or March. I would be surprised if it is not sooner.

Me, too. And with or without an EU crisis, the U.S. economy continues to sputter along at stall speed, which is discomfiting for passengers of Boeing 787s and Piper Cubs alike.

Good trading

Ditto! And thanks!

MackTheKnife

Hey Mack,

Interesting how news came just in time to avert a breaking of a key level, at least in the domestic markets. (e.g. German sentiment, Spanish treasuries, domestic housing) The one that captured my attention more than the other two, was the Spanish auctions. From what I could read, it was a serious reduction from just a month or so ago. (down from a little under 7% to %5) It may all be legit, without tampering; don't know of course.

In any event, barring any crippling news, it looks like we will not get a much wanted Christmas rally. My levels are the obvious ones ones of 200 dma and resistance levels. (I'm sure you can read a chart better than me.) However, it would not surprise me if there was a bounce above the 200, to about 1265 on S&P. Today's bounce showed a pent up Christmas rally sentiment. If we pound through 1265, I would expect this to be a great short opportunity.

Merry Christmas,

Steve

Howdy, Steve!

Interesting how news came just in time to avert a breaking of a key level, at least in the domestic markets. (e.g. German sentiment, Spanish treasuries, domestic housing) The one that captured my attention more than the other two, was the Spanish auctions. From what I could read, it was a serious reduction from just a month or so ago. (down from a little under 7% to %5)

Because I am not a debt guy but an equity guy, my understanding of the sovereign-debt crisis in the so-called developed countries is neither broad nor deep. With my bachelor's degree in political science, however, I do find interesting the difference in terms of governmental legitimacy among the three largest national economies in the Eurozone's Club Med (i.e., between Spain on the one hand, and Italy and Greece on the other hand).

In the former case, the Spanish people voted for its new government; in the latter two cases, the Italian and Greek people did not vote for their new governments, which were imposed by the Franco-German axis powers. On the continuum of legitimacy, therefore, I believe Spain's government has a comparatively strong claim, while I think the Italian and Greek governments have relatively weak claims.

If I were a debt guy, then I would demand a comparatively low premium from the more or less legitimate Spanish government and a relatively high premium from the more or less illegitimate Italian and Greek governments.

It may all be legit, without tampering; don't know of course.

In the financial markets, I assume everything to be legitimate, and I assume everything to be subject to tampering: Dog, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

In any event, barring any crippling news, it looks like we will not get a much wanted Christmas rally. My levels are the obvious ones ones of 200 dma and resistance levels. (I'm sure you can read a chart better than me.) However, it would not surprise me if there was a bounce above the 200, to about 1265 on S&P. Today's bounce showed a pent up Christmas rally sentiment. If we pound through 1265, I would expect this to be a great short opportunity.

Based on my comparatively robust multivariate analyses (encompassing economic, fundamental, sentiment, and technical factors) -- as opposed to my relatively frail technical analysis (encompassing market price and volume metrics) -- I believe there is an intermediate probability, with an upward bias, the S&P 500 could challenge resistance in the area of its three-month high level of 1,292.66 in the short term. Two key considerations in this opinion are (A) recent activity in the options market and (B) seasonality in the equity market. As a result, I most likely will not be legging into any more market-short positions until SPX approaches this area circa the end of this year or the beginning of next year, presumably during the historical Santa Claus Rally period. Given the disparity between price (strong) and volume (weak) yesterday, among other variables, I agree a nice opportunity -- or opportunities -- on the short side of the market probably will manifest themselves over the next month or so.

Merry Christmas

Ditto! And good luck!

MackTheKnife

Mack,

Meant to say we probably will get a Christmas rally. But I'm guessing you figured that out. Wrote it late before going beddy bye.

Thanks for the response.

Steve

Howdy, Steve!

Meant to say we probably will get a Christmas rally. But I'm guessing you figured that out.

More or less. If the S&P 500 were to approach your 1265 level during the next week or so, then I believe most folks would accept that as a Christmas-related rally.

Wrote it late before going beddy bye.

Man, I know that feeling! Which is why I attempt to complete the bulk of my writing during my first six hours of wakefulness each day.

Thanks for the response.

My pleasure.

Good luck!

MackTheKnife