Stock Market Analysis

Thursday, October 15, 2015

Bewildering Rally

US market did a surprising rally today even as economic data continue to deteriorate. It is clear so far that investors are truly more concerned about a rate hike than worsening economic data. That as long as the Fed does not hike rates, the currently level is attractive to investors who expect the stock market to continue upwards from here when economic data starts to turn for the better again. However, with major leading indicators pointing forward to worsening economic data in the near future, its hard to see that recovery in economic data happening anytime soon especially with the Feds already out of bullets. The only thing that the Feds could do is to resume the dreaded quantitative easing which will no doubt once again push budget deficit into the trillion zone, putting US credit rating once again in danger, which will then take that final line of defense for investors away which are bonds, the effect would be an all out recession, just like what happened during the last recession.

Looking at today's rally, we see that internals are still conflicting, total equities put call ratio rose in favor of put options, so not everyone's on board with this. The SP-500 is also once again up again that price ceiling it turned around from a week ago. This is when I like to be cool and see what happens on Friday or the next few days. I would rather look for evidence and ride a trend right after it has begun than to make a commitment at this junction. Yes, even though I am of the opinion that we are in a  market crash type of market pattern but even within such a framework, one could expect sideways or upwards movements which could last weeks.

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Market Crash Timer: ORANGE

For now, the market turns a short term, intermediate and primary neutral trend.

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