Thursday, June 17, 2010

Fundamentals, Shmundamentals



The markets were staggering against the ropes all day until the last 30 minutes when the silicon based traders went nuts and goosed the markets about 1 percent in the blink of an eye. Remember, we only care when the markets fall quickly without an explanation and we commission Congressional inquiries into the FLASH CRASH. When the markets explode thanks to Hal9000 we are asked to conveniently look the other way.

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The widely watched Philly Fed Business Outlook missed expectations by a mile and fell back to it's lowest level in ten months.

"Until this month, firms’ responses had been suggesting that labor market conditions were improving, but indexes for current employment and work hours were both slightly negative. For the first time in seven months, more firms reported a decrease in employment (18 percent) than reported an increase (17 percent)."

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Just to be fair and balanced you'll remember that earlier in the week I mentioned a widely followed technician that felt it was safe to return to the market in the near-term. An alternative concept was put forth by the godfather of technical analysis today - Robert Prechter and his Elliot Wave Theory.

"The only way for the developing configuration to satisfy a perfect set of Fibonacci time relationships is for the stock market to fall over the next six years and bottom in 2016."

"Stock market bulls and most economists think that a new bull market and economic recovery are underway. Most bears are looking for either a long sideways bear market à la 1966-1982, or a hyperinflationary run to infinity. Our Elliott Wave outlook opposes both of these scenarios. The most likely profile is a stock market crash of historic proportions."

Elliott Wave Theorist offers several reasons, including: "This bear market is of Supercycle degree, the biggest since 1720-1784. It should therefore include a decline deeper that the 89% decline of 1929-1932. A decline of 91.5% or more would carry it below 1,000." To be clear, he is saying not Dow 10,000 but the Dow under 1,000 over the next 6 years and this guy isn't some random fool blogging in the Tundra -- he's probably followed by more traders than anyone not connected to one of the big investment houses.

That was my WTF moment of the day....

Cheers!

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