27 August 2014

SP 500 and NDX Futures Daily Charts - Dog Days of Summer

These are very lazy, almost languid, markets as the hot weather of Summer has the denizens of the canyons of New York out frolicking in the Hamptons or wherever.

Our local town, which is on a long established commuter rail line into the City, is almost like a ghost town.

But the A-Team will be coming back to the markets next week, after the three day Labor Day weekend.

And they will see an equity market well levitated up to some fairly lofty levels, based on expectations of easing in Europe, and continuing soft money policy out of the Fed. With light volumes, because while Wall Street is thriving, Main Street is barely surviving. Ah, the new normal.

If the massive Alibaba IPO was not coming up in the latter part of September, I would expect the wiseguys to dump this market for about five percent. But there are so few retail buyers in there to be knocked about, they will probably have to home in on the institutions. Otherwise it is a matter of professional courtesy for the Banks not to skin the funds, or at least the bigger ones. Or perhaps not.

I think we have a good shot at going back down to the trendline anyway, in a classic wash and rinse at least once more before the Forty Thieves show up to peddle Alibaba's riches.  They will want to bring it out into a rising market and honestly, how much further do you think the market can go from here?

Incident risk remains highly elevated. This is a 'sponge cake' market, with liquidity possessing a half-life of microseconds. This market has a Panic button wired to a pile of dynamite, and the Yellen Fed is pouring gasoline over it every day.

Have a pleasant evening.