One doesn’t stand in front of a moving train and that is what the stock indexes have been for the past week or two. Let us look at what could be in the wind. All of my indicators are in an overextended area of the charts. That is just a technical thing and there has been no entry to a downside move at this time. Now let us look at what is actually happening fundamentally and the effect that it could have upon the markets. With about 450,000 people a week losing their jobs and adding over 2,000,000 people a month to the unemployment rolls is not a good thing. I don’t think the government can replace those jobs any time soon, even with their new programs. Individuals are in a state of flux as to their personal finances and paying down debt and only purchasing the necessities they need for everyday life. Those that are employed are worried that they could join the rolls at any time and are trying to buy down their outstanding obligations. Even the Federal government in its last report stated that the economy is anemic and the numbers show that the GDP is being reduce with each passing quarter. The Fed is printing money like it is going out of style and it is having little if any effect on the markets. The Fed has not run out of options, but there are very few left. The banks are not lending. Why lend on car loans, business loans or mortgages that could be shaky at this time when they can borrow from the Fed at zero cost and then buy treasuries and gain the yield with zero risk? With interest rates where they are and the fear factor driving money into treasuries the pundits are saying that a huge rally is in the works when that money shifts from bonds into stocks. My thoughts are that there will be a downdraft in this market before any rally of substance can appear. Whether it is a violent move down that has blood running in the streets or whether it will be a long drawn out, and nerve-racking, move down, I can’t tell at this time. There can even be another short squeeze that jolts prices higher that will give everyone a chance to sell their stocks at higher prices.
This entry was posted on Sunday, September 12th, 2010 at 3:53 pm and is filed under Personal Comments. You can follow any responses to this entry through the RSS 2.0 feed.
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Trading One
Commentary 09-12-10
One doesn’t stand in front of a moving train and that is what the stock indexes have been for the past week or two. Let us look at what could be in the wind. All of my indicators are in an overextended area of the charts. That is just a technical thing and there has been no entry to a downside move at this time. Now let us look at what is actually happening fundamentally and the effect that it could have upon the markets. With about 450,000 people a week losing their jobs and adding over 2,000,000 people a month to the unemployment rolls is not a good thing. I don’t think the government can replace those jobs any time soon, even with their new programs. Individuals are in a state of flux as to their personal finances and paying down debt and only purchasing the necessities they need for everyday life. Those that are employed are worried that they could join the rolls at any time and are trying to buy down their outstanding obligations. Even the Federal government in its last report stated that the economy is anemic and the numbers show that the GDP is being reduce with each passing quarter. The Fed is printing money like it is going out of style and it is having little if any effect on the markets. The Fed has not run out of options, but there are very few left. The banks are not lending. Why lend on car loans, business loans or mortgages that could be shaky at this time when they can borrow from the Fed at zero cost and then buy treasuries and gain the yield with zero risk? With interest rates where they are and the fear factor driving money into treasuries the pundits are saying that a huge rally is in the works when that money shifts from bonds into stocks. My thoughts are that there will be a downdraft in this market before any rally of substance can appear. Whether it is a violent move down that has blood running in the streets or whether it will be a long drawn out, and nerve-racking, move down, I can’t tell at this time. There can even be another short squeeze that jolts prices higher that will give everyone a chance to sell their stocks at higher prices.
Just an old man’s opinion,
Ira.
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This entry was posted on Sunday, September 12th, 2010 at 3:53 pm and is filed under Personal Comments. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.