The collision of global markets and social mood

Thursday, July 11, 2013

Bernanke Hands Out The Bowdies

Regular readers of this blog know the word bifurcation by now, because it's the go-to word for describing the state of affairs in the weird world we now live in known as mixed social mood.

Mixed social mood manifests itself as mixed signals. Soaring nominal stock prices reflective of euphoria. Plunging purchasing power (evidenced by the Dow/Gold ratio) reflective of widespread pessimism.

We can add another manifestation of bifurcation: the Fed. Are they are deliberately trying to confuse everyone, or are they themselves confused?

The Fed minutes came out and they were hawkish. Then yesterday afternoon Bernanke tossed a match on them and blew them up. The risk markets of the world and the bots that run them loved it. Last night rivaled the fireworks of the 4th.

Constant parsing of the Fed merely increases its importance, something I do not wish to add to. But I do find the level of pedantics amusing. "Tapering does not mean tightening." "Bernanke soothes on tapering."

The market and the media are acting like children in need of a security blanket. My sisters had them when we were little. They called them bowdies. They took them everywhere. Everywhere.

For now Bernanke is handing out bowdies. Later he'll hand out rocks. Then bowdies, then rocks, until everyone is so confused that they don't buy or sell. They just do nothing.

Meanwhile the dollar got whacked last night, but oil and natural gas futures are down too. Greece and Portugal are down hard as if to say "don't forget about us." The Nikkei really didn't go anywhere if you look at the chart. But the biggest tell for me, the one that says the most, is the yen.

USDJPY tanked below its 50-day moving average. That would equal 1620 on the S&P. Keep your eye on it as the temptation to jump in the nice warm water becomes overwhelming.

Either the market reverses or it doesn't.  It's looking like it wants to create a 5-five structure which would likely reach a new high. I've mentioned a Fibonacci extension target of 1778 here a few times. I'm wondering, based purely on the current structure, if that's too high.

All I know is that when I see fives waves up, I will open another short tranche, probably SH. SPXU is down 10% now. But it's times like these that I seem to rise to the occasion. I put my head down, get in the zone, and really go to work. SSO won't save me, but working hard with puts and calls and clear thinking usually does.

I got a little extra upside delta yesterday and was shaken out twice, but I re-entered when I saw a wave pattern failure from 2:35 pm to 2:40 pm that gave me the confidence to jump back in and hang in there with SPY 165 calls. I will dump half at the open and probably the rest by 10am if I can wait that long.

No comments:

Post a Comment