Fed actions and government spending may prevent a full-blown recession, but it is too early to buy stocks without worry. As the graph above indicates, the money-market yield curve is more negative than ever. Short-term rates are volatile and can change the shape of this curve very quickly, but we aren't there yet!
8 comments:
Doubtless, you are aware of the symmetrical triangle appearing in the NASDAQ 100 index. This pattern is dependable breakout pattern, and it appears to me to be reaching its apex tomorrow, February 27th. or perhaps the 28th. By dependable, I mean explosive. Typically it is a continuation pattern but sometimes leads to explosive reversals, on strong volume. Tomorrow we will get the new home sales and durable goods orders reports, neither of which looks good from my vantage point.
On the technical side however, I see a bullish divergence in MACD relative to the index. I also see positive volume action on the up days, which is especially pronounced in the broader NASDAQ composite. Google gapped down to an old support/resistance level and Bidu got hit hard too. Interesting thing is, the Fed is flooding the market with liquidity and my back of the envelope GDP projection keeps creeping up and is at 4.09% one year from now. While this is not super robust, it is steady. But note, this does not take into account the bolting inflation readings we got today in the PPI report. Food & petroleum were especially bad, but neither of which is strongly represented in the NASDAQ directly unless you factor shipping costs.
This will be a very interesting week indeed. What are your thoughts, break up, crash down or whimper?
Deborah,
I read you book with much interest. However, two of your timing or trade rationale metrics - quality spreads and fed funds rate - are only qualified as rising or falling. Do you have more specific quantified metrics and time frames for these indicators? Thanks, Dave
London's Telegraph reports that
The Federal Reserve's rescue has failed
Dear Kumbu,
You are quite an accomplished technical analyst!
So far this week the market has been "whimpering" along - at least as measured by closing prices. I think we are bouncing along the bottom because big down days attract bargain-hunters, money market is almost flat, and the 2-yr./10-yr. spread is wide.
Deb
Dear Dave,
I'm pleased that you found my book useful.
The cirtical value for each of these metrics is 2%. However, whether they are rising or falling is an important piece of information. If these measures are moving against you, it's harder to make money. Similar with money supply.
Deb
Dear Kumbu, That's quite an article in the London Times! Clever nomenclature, "Ninja Debt." Are you a Brit? Deb
Deborah:
No, I'm a Yank that slaughters the Queens English with a Mid-Atlantic accent.
Cheers!
Dear Kumbu,
Since you have a Mid-Atlantic accent, I assume that you are going to the Mid-Atlantic Hedge Fund Association meeting this evening. http://www.mahfa.org/
Best regards,
Deb
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