More free money?
That's the hope on which the markets are pinning this little rally as we bounce quickly off S&P support at 1,750 and already back to 1,800 – halfway back to 1,850 – making this little pullback the smallest of blips in the great bull rally of 2009 (now up 177% in 5 years).
What inflation? There's no inflation – unless you are buying stocks – then there has bee lots of inflation! The Fed has put $4 TRILLION into the markets through various operations and Global equities have gone up from about $30Tn to $80Tn. Don't worry though, if you add in what the BOJ, ECB and PBOC put into their ends of the markets, we're only about $40Tn shy – how could that possibly be a problem?
It's only a problem if people try to sell. Then, like 2008, they suddenly find out there's no actual buyers and prices plunge. As long as people keep believing that the market will always go up – everything will be fine – just like it was in 2007 (and 1999). So – NO SELLING PEOPLE!!!
Actually we did sell TSLA as they tested $200 and SCTY at $75 (see Member Chat for spread ideas) but we're also looking to add our bullish hedges (see yesterday's post) assuming the Futures rally holds up and we hit our tartget levels of Dow 15,900, S&P 1,806, Nasdaq 4,135, NYSE 10,100 and Russell 1,126. As I noted yesterday, we'll be happy to see just 2 of those levels and we're willing to go bullish but a rejection here today indicates we're simply forming that shoulder pattern ahead of the next leg down.
Look how quickly we flew from oversold back towards overbought on Dave Fry's McClellan Oscillator. Think about it, we "only" bounced back half but we're 2/3 of the way back to being very overbought – even though yesterday was generally flat we still bumped the oscillator up 38% – that's not really a good sign for the bulls.
Also a bad sign is Barclays (BCS) slashing 12,000 jobs as Q4 shows net losses of $844M, largely due to litigation expenses and penalties and, like JPM, they are raising bonuses 10% for the surviving staff – rewards to those who didn't get caught yet! The UK is beginning to believe in global warming as the island goes underwater from the worst floods in over 250 years. At least it will give them an excuse if Q1 numbers fail to meet expectations…
Speaking of expectations: It's 8:30 now and Yellen's prepared text to Congress is out and we shorted the Russell Futures (/TF) ahead of the notes as they crossed below 1,120 in our early morning Member Chat as we thought expectations were too high and we were brushing up against overhead resistance (see 5% Rule™).
Yellen says: "Our sense is that at this stage these developments (turmoil in Emerging Markets) do not pose a substantial risk to the U.S. economic outlook" and "The recovery in the labor market is far from complete" and "These observations underscore the importance of considering more than the unemployment rate when evaluating U.S. labor market conditions."
We'll get a bit more color when she goes before Congress but there's not too much for bulls to sink their teeth into after a 3-day, 3% rally based on expectations of Yellen handing out MORE FREE MONEY. Usually, when more money is not promised, the market has a little temper-tantrum – we'll see if this time is going to be different or not.
Meanwhile, we just shorted oil in our Member Chat at $100.25, as that is silly too. It was also a conviction short from yesterday (with adjusted levels). To learn more about how we play these crazy market moves – tune in for our LIVE WEBCAST today at 1PM EST.
