About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Monday, June 27, 2016

SPX Daily -- Setting The Stage Anew

The argument here for several years has been that when the Fed has turned off the spigots
following several years of massive inflation of its balance sheet and the monetary base, the
results are not happy for the economy and the stock market. There have been only a few
instances of this kind of activity, and based on over 100 years of history, the economy and the
market have not done badly so far, as private sector funding has been sufficient to keep a slow
recovery going as well as bids under the stock and bond markets. But, when the Fed does not
have our back with liquidity flow as now, it can be difficult for the stock market to advance
strongly and volatility can rise substantially. Note how the market has behaved since the end of
the QE programs in late 2014. SPX Daily

1. The Brexit sell - off has blown the 2016 rally out of the saddle and taken the market below
 short term support as well as the 200 day m/a.

2. The market is a significant 4% below its 25 day m/a, and is showing as oversold on the short
term RSI measure. That is enough damage to get at least a few traders interested in nibbling
long as might the very high volume.

3. The SPX is not yet close to hitting the kind of deep oversold that I think is most interesting in
a market without Fed liquidity backing and in a more volatile setting. Check out the MACD and
the momentum panels in the lower portion of the chart. This strategy would not suit many but I
have done well with it.

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