31 July 2014

SP 500 and NDX Futures Daily Charts - Don't Worry Baby


Today was 'laundry day' at the US markets, as the foamy stock peak of the past month took a hard turn in the old 'wash and rinse' cycle, that blew off the froth.

That's what it was.  Pure and simple.  Any talk of 'gloom and doom' and imminent collapse is pretty much rubbish, although the economy is certainly grossly underperforming its potential despite the rosy numbers the bureaucrats like to display.  And we know what the problem is, pure and simple.  The system needs to be reformed, and is caught in a credibility trap.

So what happened today?  The wise guys and chuckle heads have been driving up stock valuations pretty steadily for the past few months as you can see from the charts.  They hit some stiff resistance which they pounded against for the past two or three weeks.

And today with the growing troubles in the Ukraine and Gaza, the default of Argentina, and the extremely dodgy impulse of the US to lead the G7 into another cold war with Russia, the boys just decided to have a day.

Stocks dropped about 2% today.  It seems like a lot because we have not seen such a thing in quite a while.  But the market's underpinnings were made of highly compressible foam, which I had warned about a few times.

The 'tell' was the selling of gold and silver along with stocks today.  This was no flight to safety of cash on geopolitical jitters.

Let's see if we get some follow through off the Non-Farm Payrolls report tomorrow.  But I suspect that if the Alibaba IPO were still scheduled for August 8 this decline would be a one day affair.  As it is they gave up on the 'lucky numbers date' of 8/8, and have pushed it back into September.

I think it is hard to be too cynical about this market, with its hot money, computerized trading games, and pervasive dark pools.

Have a pleasant evening.