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 !!!

Thursday, August 11, 2011

Stock Market -- Sold Out Short Term

I mentioned on Mon. 8/8 that a hefty tradeable rally was quickly coming our way. By yesterday
it was clear that the market had reached classic, capitulation / exhaustion selling when measured
by volume, cumulative TRIN and TICK and a bevy of shorter term breadth and momentum measures.
The guys did like the fast double closing low on the SPX around 1120 as well. So we have had
two quick rallies (Tues. and today). They have been hard to trade because of the speed and vertical
trajectory.

Sold out markets do not necessarily mark definitive lows, but decent rallies generally follow. Even
so, the nearly comical volatility this week, with the herd running south then north on alternate days,
signifies a highly unstable market. There is no sure footing here. A shave and a shower can lead
you to miss 250 Dow points. There can easily be more whipsaw ahead, but with so much heavy
liquidation already behind us, it should be on a smaller scale as trader fatigue and weariness begin to
play a stronger role.

I have been trading in the markets since the mid 1960's and this is some of the dumbest, most
mindless stuff I've seen. Whether you are a bull or bear, pick your spots carefully and cut your
losses quickly.

SPX Chart

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Postscript: In my view, the FOMC decision statement of 8/9 also represented one of the dumbest
moves I have seen the Fed make in 45 years of watching the Bank in action. The clear suggestion
in the statement that a ZIRP could remain in effect at least until mid 2013 is not within the Fed's
manadate and defies elemental common sense.

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