Tuesday, July 03, 2007


Market update

Stocks. If you are looking for a bear market to start you will have to wait until the end of July at the earliest. Right now all short term possibilities point higher. Long term? Not so much. Way too early to be anything but bullish so look for the rally to take the stocks higher soon. Another possibility is a triangle in the Dow. That would be very exciting. Very exciting in a geeky sort of way.

Bonds. Yields will head higher (prices lower) soon, I just don't know when it's going to happen. There are a lot of good reasons to believe that a huge game of chicken is going on in bondworld with everyone wanting to unwind their horrible sub-prime portfolio. The problem is that there are no buyers and so they would rather wait and see if the market will firm up, it won't, before someone triggers the run for the exits. For a example of what I am talking about, recently Merrill Lynch seized some bad assets from Bear Stearns to sell. It caused enough problems that Wall Street is worried about the above mentioned panic triggering sell off. I shouldn't say that a panic is guaranteed. Afterall, the Fed has been known to intervene and prevent 'market events' from getting out of hand.

Dollar. It is falling but hasn't gathered much attention, yet. If bonds start down with a falling dollar then you have that nightmare scenario.

P.S. I forgot that we just had a Hindenburg Omen which is a necessary but not sufficient condition for a crash within the next four months. This summer is going to be fun, in a geeky sort of way.

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