As mentioned in my update to my last post, the S&P500 and other US markets at 2:30pm rallied fearlessly off....... not really sure. There was absolutely no reason for this action but it is expected when you have 2 POMO's in a single day. As pointed out before, watch the volume in the SPY to see how this game is played. Those that bought into the rally that didn't realize it is a setup will be banging their heads tomorrow when the market gaps 10-15 points down.
First thing to note is we are in a sideways to bearish trend. We have not made a new high for weeks now.... until we do why buy? trying to pick the bottom will be a losing game in this market.
Second thing to note is the geopolitical and macroeconomic forces at work.
Borrow some charts from this post from zerohedge
you can see the nice rally at 2:30 when the S&P500 shot straight up, however all of that and more (currently 80.82) has been recovered by the bears. So what happened at 10 pm ?
China spoke above interest rate hikes. Remember since the Yuan is tied to the USD right now, any interest rate hike has the same effects if the US raised interest rates. Which means stronger USD and since the markets are only rallied off the suppression of the USD it means lower markets. If China is serious about a 0.50% hike before January this could have dire consequences for the markets.
Why is China raising rates? Unlike here their economy actually is growing quite fast. Some speculate that they have a housing bubble etc which could be true.
Many people have been saying that the reason QE is not going to work is simple because if you make holding USD less valuable thus increase risk appetite a lot of the money will just go fund oversea companies mainly in Asia since they are growing offering higher reward for each unit of risk. As an investor it makes logical sense, so that is why we see strong growth in nations like China, Singapore, South Korea, etc.
Anyways, I have maintained a short position which I got into a couple of days back at a top. And since we haven't taken out a previous high I will maintain this position unless there is real reason not to.
Last note on what I believe occurs at market tops and more specifically this potential market top.
The market increased ruthlessly since QE2 was announced, there was never a really entry into the market unless you straight chased. No definitive pull back that reversed on strong volume. So this is the first time we have seen real sideways action. Well investors that are under the believe that things are all good will buy into this market. Who is selling? major institutional investors. They are buying when the time is right 2:30pm and they are slowly off loading their shares when time is right like today at 3:55 pm. But Net they are holding less than they did yesterday and that is the key here. Over this massive choppy action each day the "smart money" is getting out of this market.
We will see what tomorrow brings but I am still calling at least 10 point gap tomorrow leaving everyone that bought into the rally yesterday wondering what happened.
No comments:
Post a Comment