21 October 2014

SP 500 and NDX Futures Daily Charts - Draghi Racing To Da Moon

Another central bank rumour managed to light a fire under stocks, and the hedge funds ran with it.

The rumour this morning, following on Bullard's statement on possibly continuing QE, was that Mario Draghi's European Central Bank might start buying corporate debt as soon as December of this year.

And there they go!

Existing home sales came in a little better than expected, but pointing to that as some sort of fundamental trigger for this is nonsensical. The underlying fundamentals of US housing are overall weak.

But the hedge funds are anxious to make up for this years losses, and they are piling on to this market that had become deeply oversold, triggering a short squeeze V bottom.

The question is how long can they take it up, and what will they do when they reach that point, look around and see no other buyers, and say to each other, 'What do we do next?'

It is a job badly done when the capital allocations of an economy are done by a casino, said J. Maynard Keynes. And he was absolutely right.  

Remember, there is no 'we' in fiat.   Power is for the powerful.

Wall Street these days is where money goes to die. But while it lasts, the party is rocking the house.

Take a look at the mildly technical chart of the SP 500 just below.  Volume is dropping off from the big plunge, but has fallen back to 'normal.'  This big rally of the last four days has relieved the deeply oversold condition, but may now find it a little bit of a chore to pop up through the 50 DMA which is around 1966.

What rumour can they float to shake stocks out of their likely consolidation, which appears to be on deck, and get them moving higher again?

Have a pleasant evening.