The collision of global markets and social mood

Monday, June 9, 2014

The Arc Of The Asylum

Headed up to Maine this weekend to clear my head and possibly consider some other market views.

It didn't work.

Northern New England just had one of the worst winters ever, and the weekend weather was perfect, so you'd think Vacationland would be overrun with people.

It felt like a ghost town.

A very minor tap on the brakes passing through Portland at rush hour, no traffic on notorious Route 1 -- especially going through tiny Wiscasett, none! -- no line at the world famous Red's Eats, able to get seated at my favorite restaurant without a wait (on a Friday night at prime time), hardly any boats in Rockland Harbor, no traffic in Camden, hardly any boats in Camden Harbor, no traffic on the way home last night . . . spooky.

I spent hours thinking about nothing. Then I spent hours thinking about corporate balance sheets, low rates, record buy backs, record corporate debt issuance, and historic levels of Fed stimulus. Then I realized I had come full circle, back to nothing -- "The Market" has simply become a reflection of the Fed's balance sheet. But nothing grows to the sky. This too shall pass.

This wedge chart was posted Friday . . .

Here is the same chart showing Friday's closing price with an arc added. Until there is confirmation of the wedge (by a correction to 1900 or slightly below) the arc may point the way.

A melt up has only been mentioned once or twice on this blog, and the action in Jan-Feb made it seem irrelevant. With last week's low-volume breakout, it must be considered.

It still feels as if a turn could come at any time, but until the market confirms the wedge with price, the inmates are running the asylum. As was seen this weekend up in Maine, however, they may be slowly starting to leave the building.

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