With the futures down and falling ahead of the Monday open it’s time to take a look at important inflection points that will affect the medium term direction in equities and other correlated markets (crypto increasingly one of them). And as a trader it’s particularly important to determine when one’s bullish or bearish hypothesis meets its make or break point. Fortunately the market has left us with fairly clear clues as to where to ‘draw the line’ literally speaking:
If you’ve been missing my weekly updates as of late then you’re not alone. As much as I enjoy to whinge about long hours and a chronic lack of personal time the truth of the matter is that I really enjoy writing these posts. After 13 plus years you’d think I’d eventually run out of material but given the crazy times we all live in not a day passes by that does not warrant a bit of commentary occasionally infused with my notorious teutonic humor. Expressing my views here also helps me to hone and sharpen my own perspective on the market and the approaches I take to stay ahead of the market’s giant slam hammer.
Shoving lumps of coal up the bear’s hindsides has been a long standing EOY tradition, and at least in that respect 2021 did not disappoint. Of course if you happen to live in Europe where energy prices are currently exploding after German regulators – in their infinite wisdom – decided to postpone the certification of Nord Stream 2 to spring next year, then all those coal filled stockings may just get them through the winter without being tarred, feathered, and carried out of town on a rail.
I’m going to spare you the sordid details but in a nutshell our move from Valencia up to the North of Catalonia has effectively blown up in our faces. Two moving companies in succession screwed us over, which means we are currently sitting in our Valencia apartment surrounded by a few dozen boxes while we are considering our options. Which are quickly diminishing as Christmas is only a few days away. I’m literally writing this post on my MBP positioned on top of an old shoebox.
First up apologies for my perennial absence over the past month. As you may recall I’ve been planning to move my operation up to the North of Spain for quite some time now. Even before the COVID crisis life in Valencia had become too stressful and noisy as tourism exploded during the past decade. The constant drumming of the NYT and various travel publications for Valencia being the #1 expat destination frankly didn’t help matters.
Last week the stock market suddenly tripped over its own feet and landed on its face. This came a bit as a shock to many participants who over the past year became conditioned to a uni-directional market exceeding one ATH after the other. Of course what happens on an initial leg down rarely matters, what does however is the follow up, so let’s talk about that.
Cognitive dissonance seems to have evolved from a temporary phenomenon to a national pastime. Volatility continues to be pumped in the back months while the SPX is wiggling its way from one all time high to the next. If the equities market is starting to look like one giant bubble to you then you’re surely not alone.
It’s all over the news. The U.S. housing bubble, the stock market bubble, and now the crypto market bubble. In fact since the onset of the 21st century we have seemingly stumbled from one market bubble to the next.
I have been perusing the financial MSM over the past few days and beyond all the usual hyperbole and guesswork as to what the Fed may or may not decide to do there is one thing they all share in common: A total lack of consideration or care as to the long term implications of an exploding Fed balance sheet and an inability or unwillingness to draw correlations to the massive jump in inflation that consumers in and outside of the U.S. are increasingly experiencing. So basically, business as usual!
October is behind us and despite being infested with termites and cockroaches the house still appears to be standing. Historically speaking we ought to now be heading straight into the most productive earnings season of the year. Of course 2021 – like its preceding year – has not been a regular year. Nevertheless the stats are the stats, so let’s get on with it: