Good morning, Minyanville readers. Here are some brief thoughts on Thursday’s Fed action and then on to some chart setups.
If you and I did what the Fed has been doing (and will do more of), we’d go to jail for forgery and passing counterfeit currency. Since the Fed does it, it’s called “monetary policy”. It won’t create any more jobs than the first two bouts of forg…err…monetary policy, but it will inflate everything. So if you think QE3 is stupid, crazy, criminal, etc., I am with you, but chances are that the nominal value of all assets will continue to go up. As Jeff Macke often says, “Trade the market you have, not the one you think we should have.” What we have is a corporate credit market on fire and the Fed throwing gas on it. With that backdrop, I would expect a shallow pullback early this week followed by a ramp into quarter end. October might be shaky as earnings are generally going to be less than great, but once that is rationalized away and the elections are over, we should see a final surge into year end. This is far from a “variant view” blueprint, and has been offered by the likes of Jeff Saut, Bespoke.com, and a number of other strategists. But as election years go, being contrarian this year would not have paid off.
On to some charts. I’ve run across some very intriguing setups. The first involves long time fundies fave Cypress Semiconductor
(CY). With the release of Amazon’s
(AMZN) new Kindle we’ll soon find out if we are at the end of the product transition that the company blamed for the poor results of late. Meanwhile, both traditional and DeMark charts are becoming more and more bullish.
On the other side of the chip spectrum, Cirrus Logic
(CRUS) has ridden its Apple
(AAPL) connection to almost a double in less than two months. I appreciate the excitement, but keep in mind that Apple-like behemoths rarely allow their suppliers to make too much money for an extended period of time. Technically speaking both traditional and DeMark charts are flashing some warning signs.
I don’t have anything bad to say about Gartner Inc.’s
(IT) business, but both DeMark and traditional patterns do. This may be more of a swing trade, back down to the $45-46 range, than a more structural short.
Refineries can be very tricky to trade because they are incredibly streaky in their moves. But when they reverse, the ride down can be just as “exciting.” Tesoro
(TSO) is looking shaky (traditional T/A) and exhausted (DeMark). The advantage is that DeMark risk level (i.e. stop price) at $41.34 is nice and tight.
Positions in CY, CRUS, AAPL, IT, TSO
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