About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, August 20, 2010

Stock Market -- Wicked Game Short Term

Fundamentals
As discussed back in mid-June, the market has been tracking along
with my weekly cyclical pressure gauge (6/15 post) in a dogged
fashion. Even the July / early August rally reflected upticks in the
gauge on a significant bounce in sensitive materials prices. the
gauge has dropped sharply over the past two weeks on rising
unemployment insurance claims and a settling down of basic
materials spot prices and is now back where it was in early July.

This kind of tracking represents a wicked game because of the
variability of weekly data and the speed with which the trend can
change. Reminds one of squirrels racing around a tree: The oil
guys chase after the stock traders and vice versa. In yesterday's
post, I discussed how quickly trend can change in the bond
market as well, since the bond guys watch most elements of the
weekly cycle pressure data, too.

The intensity of the focus on short term economic data directly
reflects interest in whether the economy is set to experience a short
slowdown or whether something more serious and darker may be
in store.

Technical
There is a confirmed shorter term downtrend underway, but what
concerns me most at this juncture is that the market has weakened
enough in August to call into question the legitimacy of the rally that
started in early July and which I thought might well have marked a
clear bottom following the deep correction over May / June. I am
not suggesting further, more serious weakness. My point is rather
that a rally from here would suggest both mediocrity and volatility
and not the sort of brisk march up that would inspire much trader
confidence. SP 500 chart.

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