Tuesday, July 17, 2012

Boom or Bust?

The last hope of the Bulls is fading quickly. Chairman simply repeated what was in the FOMC meeting, i.e. they are ready to help. But with SPX at 1360+, Crude near $ 90, and given the political situation, he is unable to do much even while his fingers are itching for press “Print”. I think we have a A-B-C counter trend rally which is nearing the end. Whether C will make a higher high and over shoot the sloping trend line, I am not sure. But the short term cycle which caused this pop is topping now.

May a little bit push is remaining but I think we are nearing a major correction. Let us see how it plays out. If Bernanke was giving hint for any future QE, gold did not get the hint. Only equities jumped high in air and remain floated. It seems the only game in town is QE. If it has been priced in, when it comes, how far will the equities go up from here?  I do not see much of an upside for the risk assets as a whole given the economic situation of the world. (Liquidity pumping not withstanding). My thinking is bit simplistic. No QE, no Rip. We will see in couple of days.

VIX is at 16.48 as I write it. Almost at historic low level.

How low you think it can go down from here given all the headwinds?  Even Bernanke agrees with me: "Economic activity appears to have decelerated somewhat during the first half of this year." So what are they celebrating anyway? Hope? Hope is not a good investment strategy. However good the SPX chart may be looking, whatever reversal or reversal you have, hammer, rock or whatever candle pattern is there, it all boils down to central bankers provided liquidity. Without that, nothing.

Only positive I see is the strength of AUD. Even that has no basis given the dependence of AUD on China and the weakness of the Chinese economy. I would be very surprised if we do not see a severe downturn soon. Question now is, how low the 10 year rate will go down to?  And that is bleeding the Pension funds dead by thousand cuts.

There have been some changes in my personal work situation. From July 25th , I may not be able to post on a daily regular basis for at least a month, as I may have to travel extensively.  But as and when I come across important issues, I will definitely reach out to you through Twitter. For now we wait for the end game to begin soon.

Thanks for reading http://bbfinance.blogspot.com/. Please join me in Twitter (@BBFinanceblog) and do re-tweet, post it on wall and share with your friends and circle.