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September 14, 2012 08:28 AM
LONG LIVE CAPITALISM
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I read the news today, oh boy
A Day In The Life (John Lennon, Paul McCartney)
“They cannot afford to have a debt deflation in a credit addicted economy.” Marc Faber
QE swept across the landscape yesterday as Bernanke went ‘all in’.
The consensus was that if the Fed talked the talk or walked the walk that it was priced in. But what was not priced in was a Hail Mary Whatever It takes As Long As It Takes move.
But once the dust settles isn’t the Fed’s action really a sign of desperation coming with the stock market at 4 year highs and in front of the election?
But, as I said in this space yesterday, everything’s political, so never say never.
Perhaps Bernanke sensed he was in a box, embarrassed that QE1 and QE2 did not work, and decided to go for broke, literally.
Bernanke may also may realize that the Democrats and Republicans are in a Thelma & Louise lookalike contest over the so-called Fiscal Cliff and is trying to spread some foam on the runway like Denzel.
Perhaps some of you have seen the trailer for the new Denzel Washington film, ‘Flight’ in which he miraculously crash-lands his plane by turning it over and rolling it.
This ain’t no movie.
But, there’s no turning back now for the Fed and its central bank partners in crimes.
Yes, it’s a sad day for America.
Capitalism is dead. Long live capitalism.
Market participants are subjects of the Fed and no longer in control of their own destiny where it’s money for nothin’ and your stocks for free.
What is wrong with this government which also apparently had ‘credible information 48 hours before’ the Benghazi attack but no warnings were given to diplomats and the few marines guarding the embassy in Libya were not allowed to have bullets in their weapons?
How long will America kiss the backside and bend over and give billions of dollars to those who hate us?
Enough is enough.
While this is a market report, the country is in a political and economic spiral, not to mention a geo-political spiral where the President is apparently too busy campaigning to meet with our ally, Netanyahu, as mid-East tensions flare.
Enough is enough.
But not apparently for the Fed who has chosen to increase its balance sheet by $85 billion ($40 billion in MBS and $45 billion in 10-30 year Treasurys). I guess Eight IS NOT ENOUGH. In so doing, the Fed will monetize nearly half of the US budget deficit in 2013.
At that rate Fed operations will amount to nearly ONE QUARTER of US GDP.
There is an end-game on the horizon and we just got a glimpse of that horizon rushing towards us.
The Fed’s open-ended essentially whatever it takes policy move virtually removes any speculation about the Fed from here.
The Jawbone is dead. Long live the Jawbone.
The sonic boom may be short lived as the Street prices in the last bullet over Broadway. It was a nice song and dance, but now it looks like it’s just a matter of time until the market takes away the FOMC top hat, cane and tap shoes so perfectly polished up by the Maestro.
We are in unchartered territory. If this experiment that the Fed has taken to the next level fails (as history would imply), Bernanke will go down in history as dumber and more reckless that Greenspan.
It may sound trite, but sadly it looks like Thelma Greenspan and Louise Bernanke have driven us to the brink.
And they got their driving license from Congress’ Crackerjack Box.
To begin the week, I compared this year with the 1980 election cycle when Carter who was in the lead according to the polls, lost in a landslide to Reagan largely due to the Iran Hostage Crisis.
It looks increasingly like Iran and the mid-East will be front and center in this election.
While yesterday was an explosive move, if the road map from 1980 is any indication, the trajectory from here will be anything but a one way street. Expect intense swings into the end of the year if we mirror the 1980 election cycle.
Recently in this space, I noted that we are also 39 years from the Yom Kippur War that started on October 6th, 1973.
I noted that, remarkably, 39 vectors October 4th on the Square of 9 Chart with this being the one year anniversary from last years big low at 1075
The S&P satisfied our expectation of a ‘buy on the news day’ and closed right on our 1460 projection. That doesn’t mean we can’t melt up, but it means it may be over for today with an up open.
Sometimes you get 3 big days to mark climax buying, but with the synchronicity of the Yom Kippur War and tension mounting in the mid-East this weekend, I would not chase an up open.
Whether this is a melt up or a crescendo remains to be seen; however, it is amazing that 1460 squares the prior top of 1422 (from April) and that 180 degrees in time from the April high ties to early October. In addition October 4th is opposite 1460 and 1 year from low.
So, does the market drift into quarter end and early October?
Early October sets up in a big way. It is the 5th anniversary of the 2007 high and the 10th anniversary of the 2002 low.
Will the market hold up and drift into month end or does it pullback from here and move up to test 1460 again into this pregnant time frame?
This assumes of course that 1460ish is climatic and we’re not going to get a melt up which implies a new high above 1600 as we walked through in this space the other day.
. The Fed made its big move and put on a huge S&P buy program to underscore its point.
This weekend is the anniversary of Lehman’s collapse and 1468 is opposite September 14th. So, we have a possible time/price squareout that would be confirmed if yesterday’s price action is offset.
Click to enlarge
The range from the October 4th low to yesterday’s high is 389 S&P points. Remarkably, 389 squares October 4th.
This is where the art of the interpretation of the ‘Wheel’ comes in. Is the indication that we run higher into October 4th OR that the range has squared out the low at this juncture and that following a pullback, a rally back will play out into early October, in keeping with the Principle of Tests?
Click to enlarge
. We didn’t get the typical volatility on FOMC Cha Cha Day. It was a heat seeking missile to 1460. Often times, I’ve noticed that when the S&P closes PRECISELY on a potential time/price square out it is important, implying it is ‘perfected’. We’ll see.
We showed dailies and weeklies of
this week which projected to 34-34.50.
SLV is extended and has tagged the top of a channel which may satisfy a measured move. A spike above the channel that stabs back below the upper rail suggests a decent risk to reward short play.
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