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Friday Market Review.

  • Written by Syndicated Publisher No Comments Comments
    August 28, 2011

    For someone who went into this week net short I am glad to have today behind us. A big cloud of uncertainty was removed and that is the magical hand of the Fed in the equity markets. At least until September 20 when a now two day meeting will be held the Fed made it clear QE is not coming, nor operation twist.

    They did in a way mess with investor’s heads by changing the September meeting to a two-day meeting so they can discuss “various monetary tools.” Apparently they don’t have time between meeting to discuss such (sarcasm).

    Going in to today I was a tad concerned that everyone expected a selloff. When everyone says one thing the opposite usually happens. It’s quite possible with our current “conviction less market” and a number of weak handed shorts today’s price action was a simple short squeeze in an already thinly traded week as summer vacations are wrapping up.

    Few caveats to put today’s “bullish” price action in context.

    Precious metals both recovered from the “Dennis Gartman famed bubble burst.” A bubble bursting would last beyond one day and normally not involve margin hikes. Gold up normally would have seen equities lower, not the case today. Miners as well as the metals were up across the board today.

    Treasuries caught a bid today. The 10 year closed at a lower yield of 2.18% and the 30 year lower as well at 3.53%. Normally bonds would not catch a decent bid when equity markets are up so much.

    Copper was flat on the day as was oil (WTI). In a “risk on” mode as equities appeared today these two commodities should have caught a bid. They clearly did not.

    Market Technicals

    Below is an SPX daily chart showing price contained within a symmetrical triangle with five touches (3 on support and 2 on resistance) for most of August. As the triangle narrows so has SPY daily volume.

    As frustrating as days like today can be don’t take your eyes off the longer term trend and don’t let those who cannot see what you see get in your head. I’ll leave you with this quote and hope you enjoy your weekend. Try not to think of markets too much.

    “He who believes is strong; he who doubts is weak. Strong convictions precede great actions.”

    – Louisa May Alcott

    Images: Flickr (licence attribution)

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