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Investors Look for the FOMC Blessing for an Equity Melt-Up

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A tale of two tapes is upon us; see both sides.

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Greetings from the world's wildest reality show, where the parabolic frolic is alive and well. While I attended an enlightening seminar with Dr. Victoria Medvec yesterday, the stock market continued its jazzy ways. The S&P (INDEXSP:.INX) has now rallied 7.6% since October 11, 24.2% year-to-date and a whopping 166% since March 2009.

The prevailing wisdom, conventional and otherwise, is that we'll see an upside coronation to this move into year-end. If stocks that are strong all session with 2-1 positive breadth (or better) tend to end that way, markets that are strong all year -- with 92.2% of the S&P positive for the year, up 29.26% on average (data compiled by Minyanville with help from Bloomberg) -- will likely follow suit, particularly with so many funds underperforming their benchmark (read: performance anxiety).

Everything the bears have thrown at the tape this year was rubber bullets. Europe? Pishaw. A US credit default? That's funny! Sluggish growth, tepid labor markets, strained foreign relations, stretched technical readings, lopsided sentiment, or the deteriorated social mood? Ladies and gentlemen, meet The Greenspan Put 2.0, which is affectionately called The Bernanke Call in hushed tones.

Having actively traded markets for over 23 years, I've seen a lot of interesting dynamics, including the Y2K mania (and the resulting technology implosion), The Invisible Hand 1.0 in 2003, the housing bubble (and the near-destruction of free-market capitalism, if we can still call it that) and "new paradigms" in China, crude and gold that weren't. Vicious cycles of greed and feed, with investors getting punished at the top and savers getting screwed at the bottom.

After all these years -- with all the gains, losses, smiles, tears, and lost hair -- one might think I was well prepared for this year's artificial assimilation of stocks (see what I did there?) but somewhere along the way, I let an opinion get in the way of making money. Instead of blindly trading the "what," I began to ask "why?"

Why is the Federal Reserve so scared of recession?

Why aren't the folks dropping out of the labor force included in the BLS calculations?

If social mood and risk appetites shape financial markets, why does the worst mainstream mood in a generation no longer matter to the price action in financial assets?

While I can take solace in the fact that I'm not fighting this move, I haven't participated in it, either. I've focused my time and attention of late on building the business, bringing home deals, and positioning Minyanville for 2014 and beyond. I learned a long time ago that it's not only OK to take a break from the tape, it's sometimes necessary. The market, much like a casino, will be there when I return my full attention to the flickering ticks.

In terms of the here and now, I will offer two observations. The first is that October 31 -- that's tomorrow -- is year-end for many mutual funds and other financial services firms. Insofar as they've bid up their holdings to secure a solid year -- yes, that happens -- that demand could cool at some level. The second is that today is FOMC Day, which is traditionally a tale of two tapes (with 2:00 p.m. ET as the toggle), so keep that in the back of your mind as we tick-tock toward those headlines.

Good luck today.

R.P.

Twitter: @todd_harrison

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