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Random Thoughts: How Much Quantitative Easing Is Priced Into the Market?

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Taking stock of our multilinear world.

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MINYANVILLE ORIGINAL

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

I return from my stay-at-home honeymoon with a ring on my finger and vibes on my mind.

While we "work to live," rather than "live to work," I'll admit that I'm excited to be back at my turret with the rest of the Minyanville community. I will disclaim that I spent precious little time "keeping up" with the markets last week as every ounce of energy was focused on my beautiful wife, 8.5 year-old twins, and a very busy 15-month-old, Ruby Jett.

Insofar as there will be various housekeeping items today-coupled with the fact that I like to allow a few days to establish rhythm following time away from the tape-I'm gonna shoot from the hip with some random thoughts as we kick off our four-session set.

In no particular order:
  • Big Ben Bernanke all but guaranteed another round of quantitative easing last week, calling the employment dynamic "grave." (Is there any other kind?)
  • The question I have is two-fold: First, how much of that future stimulus is already priced into the market after a summer of speculation, and second, given that the shelf-life of these programs continues to get shorter, how long will it take before investors sell that news when it hits?
  • I own some Facebook (FB) down here. There is no magic formula here; the Fibonacci retracement is $19 and we've been eying it for a while. And yes, I know there is a mountain of supply that came free from the lockup last Thursday. That's why I've set my stop below $17; discipline must always trump conviction.
  • A few weeks ago, S&P 1400 was the top of the channel. As a function of time and price, S&P 1400 is not the bottom of the channel and a break below--rather than a failure at the top--has much different implications, if and when. See the chart below.

Click to enlarge
  • The week before last, we highlighted an indicator that was flashing a warning sign for the stock market. If you missed it, it can be found here.
  • I like this time of year in the NFL-the Raiders are still tied for first.
  • The bull case from here? It can be summed up in two words: Performance Anxiety. With the S&P up 12% and the Nasdaq 17% higher YTD, portfolio managers are being sucked into a "long squeeze" as under-performance is a recipe for unemployment in today's day and age.
  • The best proxies for the above-mentioned thought are in the high beta realm. If and when Apple (AAPL), Google (GOOG), Amazon (AMZN), and F5 (FFIV) begin to fail, that could signal a turning of the broader tide (as they're the "go to" vehicles for fund managers trying to catch up).
  • Trade to win; never trade "not to lose," and there are guidelines that will help us succeed.
R.P.

Twitter: @todd_harrison

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