Wednesday, July 10, 2013

SPY July 10 2013

SPY July 10 2013

The trading day was confined to a very narrow range due to worries about the release of the Fed minutes. It used to be that the market worried about earnings and wars and economic releases, but now, what truly matters is what a few government bureaucrats are thinking.

The market instinctively spurted higher upon the release of the Fed minutes, but there wasn't much meat there. As the futures chart below shows, the Fed minutes were a mere blip that quickly was erased. Value built throughout the day in the low 1640s (futures).

S&P 500 E-mini Futures during the market day, July 10, 2013

The real action happened after the close. Fed Chairman Bernanke gave an academic speech that the market interpreted as wildly Bullish about the prospects for QE. The results are shown below.

S&P 500 E-mini futures including after hours on July 10, 2013

As you can see, the futures galloped 20 handles higher in a matter of minutes. Bulls understandably are ecstatic, as a truly mediocre day turned into a bonanza for them after the close. Anyone who tries to trade on fundamentals and technicals, however, should be troubled by these developments. You can throw charts out the window if all that matters is what one man says whenever he chooses to say it - and with who knows what associates and colleagues and friends of his "in the know" before-hand about what he is going to say - which may explain some anticipatory late buying before the close.

This concentrated power in one un-elected individual is making a travesty of the markets.

I know, "whatever." If you are long, you don't care about the reasons the market is rising, and that is fine. Our outlook remains Bullish. Shorts who can't close their positions until the open are certain to close their positions in a wild frenzy and panic tomorrow morning, so expect a gap higher.

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