Today is 10/10/10 … this must mean something of significance to someone somewhere.
I understand that you, like most market watchers, are faced with more readings, prognostications, outlooks, reviews, and predictions about stock market action than perhaps any other topic worth following. The sheer numbers of publications and their respective biases, online and off, regarding the markets are staggering. Generally, most folks settle for following a handful of mainstream media sources.
And then along come I with my daily Trader Thoughts and www.wallstwise.com whose job is not to convince you of anything except that in order to be a participant in the market, in order to trade, you need some knowledge of what’s going on and you’re potential roll in it.
It isn’t as if you don’t have enough to read. I know you’re busy with other things in your life besides a sometimes fickle, terrifying, exhilarating, or boring stock market. In short, I know you’re not necessarily treating the market as if it were your livelihood. I know you pay attention to things that will help you keep your job, and so you read about your industry and keep up with changes or risk being fired.
Well, that’s what I do since the market is my industry, my job, my boss, and since you’ve shown an interest in the market I try to bring you up to speed on things of importance to the market from a trader’s perspective.
As Wall Street expects more quantitative easing from the Fed, investors this week await reports from majors like JPM, GE, and INTC. Those companies do carry some substantial pull with the overall market and could at least be seen as a precursor to how the rest of the earnings season plays out.
Here’s the key: no matter the economic data, the market will give a knee-jerk reaction to it. If the news is bad the market knows Benny is there and therefore try to advance in light of the printing presses being turned on again.
Regular readers of Trader Thoughts are aware by now of the ‘good news is bad news-bad news is good news’ phenomena. We’ve been seeing it for two weeks now. However, as Michael Santoli of Barron’s says this weekend: “Those of us who scratch our heads over the enthusiasm for QE2—given that it amounts to hoping either for continued subpar economic numbers or reckless central-bank asset inflation—might conclude that whatever possible positive market reaction we might expect to such a program has been front-loaded.”
Front-loaded indeed. This will be my trading thesis going forward… I may trade long with the market but my size trades will be loaded and triggered for a selloff.
The expectation that Republicans capture the House portending a market friendly gridlock is probably already priced into the market as well as the Bernanke pending helicopter drop of crisp, freshly minted money further devaluing purchasing power. The real issue appears to be that none of this materially alters fiscal stimulus or deficit reduction.
This coming week is froth with reports: FOMC minutes on Tuesday and Retail Sales on Friday are the big ones. Earnings from JPM, INTC, and GE along the way will stir things up as well. In short, it’s a normal market during earnings season. There is a reason some traders sit out this volatile period.
The balance of the month leading to the November 2 elections as well as the November 3 FOMC drama will keep the froth bubbling to be sure. It is the quintessential Wall of Worry backdrop. We can see spikes to the upside given that the shorts are anxious to position themselves. We can see the occassional pullback that should continue to be bought as we head into November’s Bernanke drama.
In the background, the currency warriors and their respective governments await any output from the weekend love fest meeting of G-20 participants. No one knows how that will turn out, but it is certain to have an effect on currencies and thus the stock market.
•Finance Leaders Call for IMF Role in Averting Protectionist `Currency War’
•Sales at U.S. Retailers Probably Rose for Third Month on Vehicle Purchases < This is of paramount importance to the market.
All in all, whether you're a passive observer of the markets, a day trader, or something in between, there is something this week for all participants.
And make no mistake about this, the market can drop hard IN SPITE OF BERNANKE'S PROMISE based on who-knows-what… earnings, dollar rally, black swan event. In fact, a huge selloff, whatever the cause, would give the Fed and inflationist the opportunity to go ahead with another trillion dollar printing.
Best advice, invest in the company that provides Treasury with printing ink.
