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We've had some truly incredible days lately. I'm actually exhausted from this but it's worth the push as we don't get these opportunities often. The market opened today with the intent of going higher but ended up stalling. This morning's action was based on fairly thin volume before the Fed announcement.
It seems everyone was predicting/hoping for the announcement of QE3 today. When there was no mention the market showed it's disappointment and started to sell off again. It just seemed to be another knee-jerk reaction however as a majority of the selling seemed to be exhausted after the huge drop we've had recently. Once this last bit of selling worked through, the market started to drift higher and then, all of a sudden, it turned into some sort of frenzy buying/short covering. Just classic rip your face off rally up.
Today is one of the days where I feel very comfortable just trading the intra-day set up's that come along. It's been extremely rewarding to say the least.
Going forward, it's tough to say what the Fed may do next. Based on their language, they've still left the door open for further stimulus if warranted. I do wonder how sincere that is however. Their balance sheet is looking like a good 'ol boy coming out of Las Vegas buffet. We still have the Jackson Hole event coming up so, who knows what happens next. But in the mean time, I intend to continue intra-day trading the ES.
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Lornz, if you don't mind me asking, how old are you? you don't have to give me a specific age, you can say 20's or 30's...
I have a few close friends in Oslo... Are you in banking as well, or is this a hobby?
Quite an interesting last few days as risk markets reacted tepidly to the resolution of the debt ceiling last week and market structure weakened as speculation about a double dip was on the lips of every talking head. A brief short covering rally on 08/03 was halted in it’s tracks that evening, when the BOJ followed the SNB and ECB’s lead and bought dollars in an effort to stem the rise of the yen. More capitulation selling followed as panic began to set in and capital flowed into gold and treasuries. The real death knell was sounded, of course, over the weekend, with the S&P downgrade of U.S. debt. While this announcement was not unexpected, the market opened 30 handles lower on Sunday evening. However, the dollar resumed it’s slide, the yen rallied, and treasuries were only off slightly, and quickly improved.
Given the extreme oversold nature of the market and the previously mentioned bullish seasonality associated with FOMC meetings, a very strong relief rally took place today, in spite of the fact that everybody was expecting continued accommodation by the Fed. An interesting note about the market is the fact that liquidity is at it ‘s lowest readings in quite a while, which along with program trading and HFTs is causing extreme volatility in the markets.
The burning question is what happens now- is the market structurally damaged by all that has taken place, or was the extreme capitulation just a necessary prerequisite, before the Fed ramps up equities to new highs?
Ironically, on the fundamental side, the US “economy” is still in decent shape. Private payrolls continue to gain, while it’s the public payrolls that are dragging down the headline numbers. Corporate profits are up as result of increased productivity due to lower labor costs, and increased sales overseas. Money supply continues to grow for now, but that can change rather quickly.
In any event, the Fed has it’s work cut out for them, as the market has suffered considerable technical damage. Obviously, the Fed runs the real risk of having already taken it’s best shot, and is finally confronted with an endgame where monetary policy is unable to stimulate the economy. The same holds true for Trichet and the ECB, as they too, may have already played their trump cards.
It will be interesting to see if this latest “mini-crash”will be enough to deter liquid assets from flowing into risk markets, as it did after the last crash, or if the European and U.S. markets/economies have one long last gasp in them, before there is another global meltdown.
Last edited by tigertrader; August 9th, 2011 at 09:37 PM.
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Who is going to be trapped ? Bears keep in mind that RTH boys have several gaps to be filled from the upside. I think the games will start in the last hour of RTH. I also think bad news are coordinated, after yesterday's rally it is a good timing to take all the skeletons from the closet and clear pessism's away, that is also why Bernanke didn't start the Qe3 campaign, there is always time if things get worst.
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