Wall Street chiropractors must be loving the current market, as the whiplash of the last few days is surely providing them with a steady stream of customers. Yesterday's late-day rocketship, ostensibly on the back of emergency discount rate rumours, was in reality just the upside analogue of Friday's late-session meltdown. Lots of noise, wide ranges, but relatively little net change. Having been stopped into a Treasury short near the lows, Macro Man has now been stopped out near the highs. Ugh.
What's remarkable is that despite the turmoil and volatility of the last six months, the S&P 500 has, on aggregate, netiher gained nor lost ground. Indeed, it's spent most of its time since mid-April in a relatively tight 1450-1550 range, with a couple of peeks to the topside and August's bum-clenching downside test.
That the 200 day moving average continues to contain losses is an encouraging sign; less positive is the lack of breadth in the market. Earnings expectations surely have further markdowns to come; by the same token, bonds offer little competition at current yields. Soveriegn wealth funds will be switching out of fixed income and into equity; however, the buyback and private equity bid seems likely to be less potent in the future. October seasonality is horrible; seasonality in November and December, meanwhile, is usually quite supportive of the market.
So there are plenty of reasons to be bearish, but valid reasons to be bullish as well. On balance Macro Man feels like the market is bearish, but it's hard to be sure. So he is curious about your view. Punch in your view in the poll below; apologies to the couple of you who voted in the sidebar poll, but Macro Man prefers this format- feel free to vote again!
What's remarkable is that despite the turmoil and volatility of the last six months, the S&P 500 has, on aggregate, netiher gained nor lost ground. Indeed, it's spent most of its time since mid-April in a relatively tight 1450-1550 range, with a couple of peeks to the topside and August's bum-clenching downside test.
That the 200 day moving average continues to contain losses is an encouraging sign; less positive is the lack of breadth in the market. Earnings expectations surely have further markdowns to come; by the same token, bonds offer little competition at current yields. Soveriegn wealth funds will be switching out of fixed income and into equity; however, the buyback and private equity bid seems likely to be less potent in the future. October seasonality is horrible; seasonality in November and December, meanwhile, is usually quite supportive of the market.So there are plenty of reasons to be bearish, but valid reasons to be bullish as well. On balance Macro Man feels like the market is bearish, but it's hard to be sure. So he is curious about your view. Punch in your view in the poll below; apologies to the couple of you who voted in the sidebar poll, but Macro Man prefers this format- feel free to vote again!
11 comments
Click here for commentsG'day Macroman,
ReplyLike your blog. Poll is a subtle way of estimating what type of reader you have - pro v retail :)
AussieDave
Ha. I have a pretty good idea of that from the comments section. I just find it useful to distinguish between sentiment of those who watch screens all day, every weekday, and the informed man/woman on the street.
ReplyThe last poll did suggest that retail was more bearish, in aggregate, than market guys. Seeing if/how that shifts might prove useful.
Macro dude, can you answer this question: when will market participants stop expecting big daddy Ben to bail them out of their ridiculously bad trading decisions? If greedy "pros" such as Merrill could have messed up with a whopping $8bn loss/writedown and maybe even some on top of that, what is a retail Joe with 2 outrageous resetting mortgages and a social-climber wife to do? Do people seriously think the Fed have any clue about the real economy? Wouldn't they be hedge fund managers if they did? They have one tool -- i-rates -- and the rest of the time they just spend picking their noses and praying to their finance gods that the retail schmucks and the Den of Thieves crowd on Wall Street actually believe what they are saying... When is this ludicrous charade going to end and this blind faith in Father X-mas going to be shattered? And when it does, how is the Western capitalist financial system going to take it?
ReplyAnon, First of all, she should be climbing the social ladder at Scores in Manhattan instead of UBS in Stamford. Much more down to earth executives hang out at the former.
ReplyFor the rest of your post, you have to pop your cranium from you arse and play your cards as their dealt, dude. And drink heavily.
Big John
Anon, First of all, she should be climbing the social ladder at Scores in Manhattan instead of UBS in Stamford. Much more down to earth executives hang out at the former.
ReplyFor the rest of your post, you have to pop your cranium from you arse and play your cards as their dealt, dude. And drink heavily.
Big John
When is TGIC going to announce bankruptcy? And when is the market going to care?
Replyjames,
ReplyI think the MBI call might do the trick, especially the last 15 minutes.
RJ
RE #3 and 4: Guys, let's remember to play nicely, please.
ReplyThinkers and drinkers alike seem about equally divided per the poll. Depends on your point of view, I suppose, from inside or from outside the US. If S&P goes up due to Big Ben's helicopter loads of strewn cash, how low will the dollar fall to negate the happy news for foreign investors? I'm betting with the non-US investors.
ReplyRetail here: The looming implosion of the markets and a dollar collapse/inflation explosion seem to be all the rage. I've listened to those arguments why the apocalypse is nigh and there are a lot of good ones. The only concern I have is both of those themes is it seems a lot of people are crowding that side of the boat. It's quite the herd of contrarians.
ReplyThe day of reckoning I'm sure will be along any day now. There are a lot of well capitalized well connected folks who don't want the train to run off the tracks. Also haven't we seen this movie before with the crazy high Reagan deficit and the Japanese who were eating our lunch and were going to rule the world within the next 5 years.
I kinda wonder if the S&P is just going to fart around in a range on low volume while everyone chases the international investing/weak dollar story.
I voted retail 1450-1550. I struggled to answer because at the end of the day it's just a guess.
ReplyFirstly, the track record of the "experts" in predicting future S&P500 levels is abysmal, and we retail en masse seem to be good at forecasting the opposite to what actually happens - read AAII sentiment here.
Secondly, we have the problem of a point estimate in time. In reaching my guess, I have surmised that the market may go down over the next month or so before rising again by end of December, with potential for going higher in the new year. Therefore, am I bullish, bearish or neutral? Depends on the time frame. (This is one reason I can't stand the question is the glass half full or half empty - what's the trend leading up to, and likely after, the half way mark??)
Thirdly, from a statistics standpoint, I understand the best estimate of near term future prices is the current price!
Thus, as an "unknowing" retail trader/investor, I just go with the trend until it changes, losing a little at the top, a little at the bottom, and a bit in the chop!
Maybe this will help you flesh out your poll analysis in addition to understaning the change in poll sentiment!
AussieDave