I don't know where I am going, but I sure know where I've been. Where have I been? From the depths of the worst sell-off to start ta year and back. That's where.... Just another market in need of rescue. Waiting on Central Banks sweet charity. An' I'm gonna hold on to my $MCD long for the rest of my days. 'Cause I know what it means, to buy corporate bonds and walk along the lonely street of dreams......
Here I Go Again? Yes the market is off doing its now routine morning spike. The world is a better place when the stock market is up. Yet these gains are being built on the backs of our grandchildren. Demand has been sucked forward in the form of cheap money. Central banks continue expanding their unprecedented policies, buying everything they can to avert the inevitable. Recessions are a fact of a normally functioning market. The system needs to be flushed at a regular interval to wipe out inefficiency. In nature only the fittest survive. In our global economy the Central Banks try to ensure everyone survives, yet we all die in the end....
How many more rounds to the Central Banks have in their pistols? Technically they will never run out of ammo, the prime reason being they have the ability to print as much money as they need. An unlimited credit card. But with unlimited credit comes risks. We have already witnessed it in the energy sector. Years of free money flowed into the energy sector as crude oil prices soared. When the Crude Oil bubble popped, it caught everyone off guard. This is the first of what will be many bubbles popping globally as the Central Bank's hubrice gets revealed in the years ahead. For now we watch the markets continue to inflate. Corporation utilize cheap debt to buyback their own stock at dizzying, record rates. Shareholders are treated like Gods at the expense of the very workers making all the profits possible.
I thought I was going to get off my soap box.... perhaps now is the time.
I look at the markets the last few days and for the very first time since the Feb lows we are seeing morning rallys get sold. Sell the Rip? We haven't seen that since early in the year. The winds of change are coming. Right now the action is flapping around with $SPY holding $204 and getting slapped down at $206. But the VIX appears to have bottomed, and momentum continues to wane.
And here is what I think is going to happen in the short term. The spikes will come and go, but ultimately they will get sold under $SPY comes back down to $200. Yeah, 2% of downside feels more like 10% in 2016, where negative is the new positive, and Central Banks have moved to adding Corporate bonds to their asset price manipulation portfolio's.
Here I go again. Let's see if this mornings rip gets sold. $SPY under $204? That would be a great start to the move to $200.
See you in the chat room