September could be a month o remember…or not.
While economists are pretty much focussed on a September hike…the jury is still out there.
In the data related market (options pattern, VIX, bond curve) there is nothing indicating a rise.
In the gold pricing structure and in the USD actually there is a “not hike” hypothesis.
If September does not happen the next most probable month is December.
So the Jury is not out and what the market thinks about it even less.
In doubt, do not bet!
In October I was saying that the US Republican Congress win could be a game changer for the markets.
The US Federal Reserve has been clearly protecting and encouraging this share market rally (they admitted it in several occasion).
In October I showed that there was at least a part of the Republicans that were less than sure of the independence of the FED (unfortunately I do not have the time to go in detail).
Today there was the first full on confrontation between the Chairman Yellen and two very powerful Republicans and it did not end well for the FED.
The 3rd March there is an hearing on reforms for the FED.
Watch this space.
Today I received an UNCONFIRMED Demark signal .
It is difficult to explain, but essentially it happened 6 times in history.
3 times marked major crash (also May 2008)
1 time a 20% drop and 16 years of “going no where market”
2 times a 10% drop and a 1.5 year of going nowhere market.
It is UNCONFIRMED and can be disproved.
On the other side we have the VIX at 16.29 – High Danger Area (over 17.98 is big trouble with target 28)
And October, statistically, is 17% more volatile than September.
Let’s say …it does not look good.
The Fed this week intervened heavily, but succeeded just not to make the Dow Jones and SP 500 not crash. But all other indexes sustained damages.
Wow! That was a market surprise. The Fed did not start tapering!
The main issue has been the spikes in yields and consequences on the mortgage. Already there were some signs of decrease mortgages sign up and so the fed evidently got worried of stalling the feeble recovery.
So this data – point signals that, in reality, the US recovery is much more feeble than before.
This fact anyway clear another obstacle to the massive rally. The SP500 is by any mean overstretched and should pull back a little (3-5%), but this market is more an emotional black/red gamble than a technical market.
The Red/Black Casino style events still on the path are
US Debt Ceiling – unless they decide again to postpone/stopgap the issue
German election – it should be uneventful as PM Merkel is solidly ahead in the polls
Berlusconi – even if thrown out he should not make the Government fail otherwise he will have a polls backlash
Syria – 21 September first deadline of the Russian/US bluff/deal
Update:
Institutional Investors are in neutral
Last days rally had been driven mainly by short covering position (shares. AUD, Oil, Gold)
The Mutual Fund Survey (US) is showing retail investor clearly going bullish.
Markets is priced to perfection. Any tail risk will have great consequences
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