Tue 10AUG2010 02:24GMT
FOMC statement due at 1815 GMT.
The markets seem to be panting for more stimulus from the Fed (some more QE, at least QE Lite if nothing else) while some of the more sage observers are thinking that aint gonna happen (maybe, just maybe, some QE Lite).
So where does that leave me, some average schmuck?
I find it difficult to believe that there are too many shorts out there, at least shorts at recent levels. While the longs haven’t had much to cheer about in recent days (the market keeps bouncing back after getting sold, and just maybe we are running under resistance here doing a bit of absorbing) the shorts really have even less to cheer them. Bad figures, bad sentiment, some good impulsive-looking sell offs (intraday) … but no follow through, in fact the prices keep bouncing back.
I reckon the shorts have had to be buying back. Of course, there will be shorts out there still holding, counting on the Fed doing nothing , the markets being disappointed and thus selling. Just as there will be longs out there punting on the Fed doing something and the markets jumping on to buy. I just reckon there are more longs than shorts at recent levels and the danger is a sell-off after the statement.
If the statement says no extra stimulus, then the equities sell-off straight away, without much in the way of shorts to provide some support. If the Fed gives us something, more QE, or QE Lite, anything, then I think any move up will be sold into … and thus lower.
Over-riding all this is the knowledge that it is summer and extra thin, so plenty of scope for some pushing around of prices by players … if you are in profit don’t expect it to ride on and on, take profits and look for spikes in your favour to re-enter if you wish. Chop is the continuing order of the month.
My model … well I don’t know how relevant it is going into such an anticipated meeting and the injection of fresh information on the statement release. FWIW my models are still calling for some lower prices. I will be re-assessing them ahead of the release but will be unlikely to updating them on the blog (sorry). Maybe a quick one-liner if I can.0