by Rasool Cunningham
Futures Trading Editor
Philadelphia, PA (DYDD)
I’m not just saying that because it’s DYDD content. I’ve watched this about three times today. It’s chock full of great information. Check it out, and I’ll add my comments and market analysis after the vid. Enjoy!
Co-host @iuubob starts it off with his thoughts on Egypt. When asked what’s the most pressing political thing out there, he answers Egypt. I agree that Egypt is important, but I don’t think the most politically interesting thing right now is Egypt. I think it’s the Trayvon Martin case verdict, and here’s why: It has pulled up, and out, emotions in so many people that its effects will be felt for a long time to come.
The political landscape will change from the reverberations from this for some time to come. Voter ID laws will be combated with more people getting ID’s and more people voting. People on Zimmerman’s side will fight for their gun rights that much more now, and vote accordingly. People who had no interest in the judicial system or laws, how they come about, and who makes them now are giving this their full attention. To me this is a big deal. There weren’t huge protests about Egypt here. But this got people off their asses and out and about. It drew half a million signatures on a petition. I don’t even know if there is a petition for Egypt. It means nothing that I haven’t heard of a petition for Egypt, but it goes to my main point. Signatures, for the most part, equal voters; and in politics nothing else matters. That’s just my two cent. Bob could very well be right, and Egypt may be the top political thing right now.
Next, @GMRobertson came next with his thoughts on the Fed tightening. This was super interesting to me. He had great charts and a good argument for the case that the Fed has tightened already. I thought of it like rain. If the tightening is rain, the Fed is the cloud. When rain falls from a cloud it’s not felt on the ground right away, but soon it is. And if the Fed is the cloud and the tightening is the rain, then GDP growth is the shelter, or umbrella, or poncho/rain coat. Then @aiki14, right on que asked the question most would ask: What?
Before I get into the answer to that question, which I agree with, let me touch on what I disagree with in what George said.
He said Bernanke doesn’t like the fact that his tapering talk is now being priced out of the market. I disagree. I think Bernanke is fine with it. I don’t think he wants the market to fall like a stone. I don’t think he wants the dollar to go to the moon either. He also doesn’t want rates to move too much before he and the committee are ready. Taking all this into consideration, and the fact that the market can price things in a lot faster than they happen, and I think Bernanke has to take the market down just as well as he took it up. And I think he’s doing a masterful job. The market takes the escalator up, elevator down. Bernanke doesn’t want the elevator cord to snap and start an elevator free fall.
As for the answer to the question posed by @aki14: what has the Fed done? The Fed has signaled that it’s expansionary policies will actually come to an end. This signal has moved rates, and there is a divergence between rates and stocks. They haven’t started draining liquidity out of the markets yet, but they’ve signaled they will first stop expansion. After that it doesn’t take a Rain Man to figure that draining comes. So Jim, or @aiki14 says, the Fed isn’t doing anything, but the market has begun to price it in. George’s explanation of why he says the Fed has tightened was very good shit. It starts at the 17:00 mark of the vid and it centers on the LIBOR rate. It’s powerful and it’s something to look out for in the markets in the coming weeks and months. @GMRobertson says the Fed tightened because it was the Fed who got this ball rolling.
In the mean time the strong dollar has strengthened and hurt Emerging Markets as well as companies here in the U.S. The only way the Fed could address this strong dollar was to back up on the tapering talk. They did that and the dollar is now showing weakness. Then, host @JackHBarnes brings in @sellputs and he talks oil, but his commentary on the MBS market, this was another highlight to me. This has to be watched and paid close attention to going forward also. This also lead to a comment by @GMRobertson on bonds that should be studied. Bonds are moving the way they are for a reason. He says we should be trying to figure out why, and I agree. Jim also made a great point right after that about expectations to sort of refute what George said. I agree with him that that can happen, but this is why Bernanke sent the tapering signal from the start. To manage expectations.
All this leads me to believe that all these guys are good, and got better after this show. I think I did. Also it makes me think the market at these highs again will go down again. Looking at the $SPX chart today’s action wasn’t much, but looking at all the action over the past month gives one the impression that the market needs a rest. Here it is:
Image may be NSFW.
Clik here to view.
You can’t automatically say the market needs a rest here. And all the problems highlighted above don’t have to be priced into the market right now, so it’s not a given that the market needs a rest. It just looks that way to me. Add to that the fact that adjustments to large positions by large market participants need to be made, and you have a recipe for weakness. But somebody is buying, so, my $ES_f short is small. Five contracts there, like the CL_f short trade. A short rest now that we’re back to the highs to me seems possible, and even probable. With earnings season upon us it won’t be a drawn out affair. We’ll find out soon enough how all the biggest companies, and thus the economy, is doing.
What Jim and George said in the vid about oil was good stuff also. They both made good points on opposing views. I think the technicals point to George being right, but it could just be a technical pull back that resumes to the upside quickly. What Jim said about the inventory numbers Thursday was valid also, because crude isn’t going to move on what’s there now, but what’s expected to be there later. Mixed with he geopolitical risks, crude could have continued upward pressure. I explained in the market blog why the technicals made me hold, so check that out if you haven’t. And be sure to check out the Macro Contrarians Tourist Hour Next Sunday night 7pm est.
For now that’s it traders. Again, thanks for reading, and good luck in your trading this week.