In addition to the POMO schedule that everyone knows about, the Fed announced it will buy $75B in long term treasuries per month for 8 months, totaling $600B in QE2.
The S&P rallied 9 points in about 6 minutes on the announcement, from 1187 to 1196. Then the S&P sold off 13 points down to 1183 (low of the day) in the next 12 minutes before rebounding to 1189.
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A 13 point band of stop-running.
ReplyDeleteParker,
ReplyDeleteWhat are your thoughts on the spiking interest rates for the long term treasuries? I would have thought buying 600 Billion worth of Treasuries would drop rates not make them rise?
Thanks in advance
I had the same thought, Anonymous.
ReplyDeleteMy thought is this: that's not what Bernanke was hoping for.
ReplyDeleteParker:
ReplyDeletePermit me to explain my bullish tilt. I have several reasons, but I will give you 1 indicator that I believe is predictive in this case (of course, as we all know, every indicator has its pluses and minuses, but this one I think is better than most). That indicator is Williams A/D. Here is my interpretation of what it is currently “saying”:
First, load the S&P 500 on Freestockcharts.com and add the Willaims A/D indicator study to the daily price action. Here are the things I notice:
(1) Williams A/D is making a higher high vis a vis the April top (interpretation: bullish).
(2) Note the price peak of Williams A/D on October 18, 2010 at approximately 607. On that day the S&P 500 closed at 1184. Currently Williams A/D stands at about 652. In fact the oscillator is climbing much faster than the index. Here’s a very rough guestimate as to where we are heading on the S&P:
1184/X as 607/652 X= 1271.
This is obviously not a perfect indicator, nor is it a perfect target generator for the S&P. Also, everyone and their brother knows this baby is due for a correction. Furthermore, Williams A/D is fluid and moves with price. And noone in their right mind trades off of 1 indicator. But for now, I think this indicator is saying if you are short, you’re probably asking for trouble.
Anyway, that’s my 2 cents for what it’s worth (and it ain’t worth much). I will now shut my trap.
Best of luck,
Jim
The sell off after the number was due to short locals on the offer but they couldn’t find any paper sellers to lay off on, only more buying. They got run over on the next rally, very bullish action.
ReplyDeleteRegarding POMO you may be interested in Tom McClellan's recent "chart in focus" www.mcoscillator.com/
The Feds want lower rates to stimulate, they just ran out of bullets so they buy T's to move the rate. Its a good move,,,,, for now…… they have a blank check so they can do what ever they want. My kids might regret it but it’s still the right choice.
ReplyDeleteThe Ponzi scheme can last a long time with blank checks. It’s the “outside” influence that that will collapse the house of cards. Like the hard break in equities that caught Madoff without enough cash on hand to meet the demand of his investors.
Unless there is some other [outside] influence, I don’t think we will see a waterfall, just yet, a pull back but not a waterfall.
I think tomorrow should be an interesting day……………… if you are a day trader.
Parker, careful with those stops at the high of the leg- we gun for those, give it some wiggle.
Tim, any chance that you are going to update your blog? You left everyone hanging with a promise to continue your blog. BTW, I know you were very bearish at the time when you were still publishing your blog. Are you still bearish or you have now turned bullish due to the relentless paper buy orders we have seen since the end of Aug?
ReplyDeleteI may pick it up the blog again, especially if this market continues to creep but I will only post position stuff, not my daily notes and trades. I was getting some grief from some traders about what I was posting and I need some of them as an information resource so it more important to me to blab about the broad picture, which I am less knowledgeable about therefore less enthusiastic to write about.
ReplyDeleteForecasting the market is like forecasting the weather, you know the probabilities of the weather for the next 2 days but the probabilities of being accurate diminish trying to predict the weather for the next two weeks and forget about the next 2 months. The best you can do is predict the seasons but you never know exactly when winter will start, ……..sometimes it never comes.
I see things shaping up like 1976, still some more upside to go then a break. The break will tell us if all the perma bears will be right or we just chop. I think I stated that in my last post in my blog
But what the hell do I know, Im just a dirty scalper, lol.