Going For Three?
Hopefully, like most things in life, it comes in
threes, or even better, just continues. Like turning on a light
switch, trading is back in a big way again. Yesterday and Friday were ideal for
buying pullbacks throughout the session. Trying to call tops, even at decent
resistance was an act of futility. Remember, trade with the trend.
The afternoon showed us a market that appeared tired. Hell, after two big
days, it’s exhausted. Remember, the last month or two the market has gotten out
of shape. I would not be surprised, assuming no news bombshells, if we are
pretty quiet today. Options expiration certainly adds that dimension as well.
If you happened to be keeping an eye on the newswire yesterday afternoon,
around 3:15 PM EST, one of the Fed Governors was quoted as saying that the Fed
stands ready to be very accommodating going forward, etc., etc. Naturally, I am
paraphrasing. However, this is revealing given that most of the economic data
coming out has been pretty solid. What does the Fed see going forward? Lower
rates, while stimulative, certainly would be a further blow to the dollar.
This is all speculation, but interesting nonetheless.
However, it does resonate with a piece I read over the weekend regarding the
ballooning amount of money that households have in Money Market Funds. The
author of the story, Paul Kasriel, of Northern Trust, argues that with the
increased supply of money entering these vehicles, it has also been at a time
where the percentage of assets in these funds that are government guaranteed
Treasury securities is on the decline.
So? His assertion is that if corporate indebtedness continues to rise (see
graph) and interest rates rise, will corporations be in jeopardy of defaulting?
Remember, money market accounts make no guarantee to always redeem shares at $1
per share. A few more Enron/Global Crossing-type scenarios and it may not be
nice. The author’s point is simple, the Fed is in a corner. If it raises rates,
it runs risks, if it does not raise rates, it risks stoking inflation. What an
interesting time we live in.
With respect to today’s trading, it is possible we may see an inside day
after two very large-range days. This would not be uncommon. However, the juices
are flowing once again in the market, and trading has been good. If it
continues, be sure to take full advantage. With summer fast approaching, days
like yesterday and Friday become a bit rare. This quote from Stanley
Druckenmiller is appropriate:
“The
way to build superior long-term returns is through preservation of capital and
home runs…When you have a tremendous conviction on a trade, you have to go for
the jugular. It takes courage to be a
pig.â€
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| 1056-58 | 1196 (key resistance) |
| 1044 (key resistance) | 1168 (key resistance) |
| 1040 | 1162 |
| 1028-31 (confluence) | 1134-37 |
| 1021 | 1110 |
| 1010 | 1087 |
As always, feel free to send me your comments and
questions. See you in TradersWire.
P.S. Click
here if you would like to know the levels
where I’m looking for
reversals in the most actively traded stocks.