The collision of global markets and social mood

Tuesday, August 27, 2013

Hanging Out In The Shade

Yesterday afternoon the market began telling a different story. And the overnight session brought it into sharper focus. Yesterday was the first time in many moons that a low volume drift higher has failed. Are we back to normal trading?

I would love it if such things mattered once more, that all I ask. If we're in a bull market, all I ask is for volume to keep expanding. Only then will I jump in the pool with my momo friends. Otherwise I hang out in the shade, trying not to get burned.

The bottomline is that the S&P reversed from a multi-day 38% Fib retracement off the 1639.43 lows. This targets 1600 if volume expands vs. 8/21 (which should not be too difficult). however, I'm still thinking 1630 and 1617 as levels to be tested first.

Here we are about to enter another war with about the same level of evidence as we had in Iraq -- zero -- and this morning's headline on Bloomberg is America Resilient Five Years After Great Recession.

The signs of resilience are everywhere: Households continue to spend. Businesses are investing and hiring. Home sales are rebounding, and the automobile industry is surging. Banks have healthier balance sheets, and credit is easing. All this coincides with the economy shedding the excesses of the past, such as unmanageable levels of consumer and corporate debt.

This sort of blatant PR makes me want to puke. It's not news; it's social conditioning.

An economy that is built on stimulus is co-dependent, not resilient.

Bloomberg also reports that Bill Ackman is dumping his stake in J.C. Penny. His position is so large that he needs Citigroup to underwrite the sale. He'll take about a $500 million loss. He could have hung out in the shade and avoided the burn. But no.


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