In my opinion, Janice Yellen might make an excellent Oil of Olay model. While I am not so sure about her skin complexion, I am sure that she “keeps them guessing” when it comes to the Fed’s date to actually, really and genuinely tighten. But for real, this time…
The market liked yesterdays rate decision. Or should I say, the market liked the lack of decision – again. The market cheered the Fed’s no-do plan – obviously thinking it was the wise thing to do. Never mind that the Fed doesn’t always make the right moves – as illustrated by the Fed orchestrated real estate and stock bubbles of early 2000’s. We know how that ended in 2008. Now the Fed has orchestrated a “new and improved” bubble in stocks and real estate.
Every bubble has a name:
- The American Growth bubble of the 1920’s
- The Nifty Fifty bubble of the 1970’s
- The Dot Com bubble of the 1990’s
- The Sub-prime & Oil bubble of the early 2000’s
- Now, it’s the “NOA” (No Other Alternative) bubble. Markets rise because there is No Other Alternative (i.e. no safe investments paying a reasonable rate of return). This is thin ground for a bull market to continue. Markets need to rise on a strengthening economy and rising corporate profitability. Despite my belief in the long termed secular bull market, I am wary of the intermediate termed outlook.
Who knows when it will end? But, like the last Fed orchestrated bubble, when it ends, it aint gonna be pretty. Don’t get me wrong. As noted above–I am a long term secular bull – but I am wary of the mid-termed (1 year or so) outlook. For the time being, we can only look at the neartermed trends. I don’t know when this bubble will pop. So lets play along with Janice and see if we can’t make some money along the way.
Yesterday’s action brought the S&P500 to the top of its prior near termed trading range. 2170-ish may present a bit of technical resistance in the near term. 2130 continues to be support. The bullish hooks on the daily chart’s momentum indicators show a near termed rally from an oversold level may have legs, despite the resistance at 2170. Moneyflow (top and bottom panes) is weakening –which is a bit strange.
The weekly chart shows intermediate termed momentum indicator deterioration, suggesting we may see more volatility – after a near termed rally – before markets begin a true bullish trend.
For those who missed it, I was at the MoneyShow last weekend. I’ll recap some of the highlights from my presentation over the coming blogs.