1st comment!

27Aug2010 0430GMT

Well, this blog got its first comment yesterday … a big day!

I am not gong to ‘reply’ to the comment, instead I am going to reproduce it here as the basis for today’s post …

OK, so “Frink” said:
frink says:
August 26, 2010 at 8:20 am

The commentary has been quite interesting of late hasn’t it! Amongst all of the double dip talk we’ve had the “technical” crowd doing the same: The “death cross” was supposedly bad, as was the Baltic dry index crashing(just don’t mention the supply side of the equation!), now it’s the hindenburg omen. And despite all of this talk, the SPY hasn’t posted new lows for 7 weeks.

If the markets do crash from here, there will be a lot of rich people out there as it seems like every man and his dog are short!

I agree. I don’t think I have EVER seen such bearishness be unaccompanied by no new lows for about 2 months. It all seems a bit crazy fearful.

If Bernanke speaks at the Jackson Hole meeting today and the equity markets then go higher, your technical points, Frink, are going to look legendary and I for one will be leading the ‘kick yourself’ brigade for not acting on very perceptive comments. But I am a wimp, wouldn’t really matter what was going on, I will be flat at 10am NY time, joining in later. The risks are just too high for me over something like this.

What do I think will happen tonight? Another reason for me to be a wimp. I have no clue.

The good oil appears to be pretty much nothing meaningful coming from Bernanke. This makes sense to me. Hilsenrath’s WSJ article painted a picture of the Fed introducing the next leg of QE (buying USTs to maintain the balance sheet, not to let it shrink) in response to a faster than expected retirement of debt the Fed is holding. Not in response to a perceived worsening of the US economy. Maybe I have the wrong impression from that article, but thats what it said to me about this new injection of QE. I said yesterday the Fed may be forced by all the yelling to DO SOMETHING …. but I don’t think it happens today.

So if it is nothing out of the Fed, is the reaction going to be the same as it was after (a day after?, whats with that?) the Aug 10 FOMC meeting … i.e. equity market sell-off? Yeah, I think so. But like Frink says, there are A LOT of shorts out there. So, maybe a dip to the early July lows, then some some support? I.e., sell-off, but not too much joy in it for the shorts, there just seems to be too many of them.

Sorry to be so wishy-washy. But, on the other hand, I am a wimp too 🙂

What are my models saying?
No. 1 model … not much that I can see, sorry. Twist my arm and I would be interpreting it as bearish.
However, no. 2 model is a bit more helpful today. It is showing a reasonable buy back of shorts (profit-taking, presumably, but definitely lightening up positions) on the sell-off after lunch in NY yesterday. Hardly surprising ahead of the Jackson Hole meeting. Ordinarily, an interpretation such as this from the model would imply a bounce in the first few cash hours (at least) for the following session. This interpretation needs to be tempered by the expected fresh information flow from Mr. B’s mouth at 10 am NY.


Just one more thing, yesterday I quoted from A Dash of Insight, Jeff Miller’s outstandingly good blog, I am unsure if I linked it correctly, so just wanted to provide this link too:

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