Wednesday, January 27, 2016

Has #BTFD been replaced with #STFR?

Today's little temper tantrum in the market caught most of us by surprise.  The consensus expectation for what the Fed would say was actually pretty accurate and yet, the market acted as if it was surprised that most Fed forecasters were actually right.

After 7 years of extraordinary measures to attempt to rescue the US economy the Fed decided in December it was time to see if the economy could ride down the driveway without its training wheels.  The market has responded as it has at each previous point in the Great Recovery - selling off hard and demanding more Fed measures to prop up equities at any and all cost.

This created a clever hashtag related to the markets: Since the Fed has our back, every time the market falls just Buy The Flipping Dip - #BTFD (though the actual word probably isn't flipping but this is a family blog, right?)

Well, now that the Fed seems to be working with either bad data, old data or is just clueless, the markets have become rattled and the question bouncing around Wall Street is should we Sell The Flipping Rip - #STFR (ie, sell every bounce).

So far in 2016, #STFR is winning this battle of wills, but there will be plenty of opportunities for the dip buyers to have their day.

Facebook will be the talk of the town tomorrow after delivering good results (though average daily users seems to have plateaued thankfully).  I'd expect plenty of Fed chatter as they try to confuse the market with what their message REALLY is.

If you've been on the right side of the trading in 2016, this has been an incredibly lucrative year in the first month.  However, I suspect many active traders are getting burned by chasing ideas and that means there may be fewer natural buyers if we get close to those dangerous levels on the S&P 500 again - 1820 is a number to have on a post-it note in your office.  If we break that number the implications for everything from state budgets to the 2016 elections will be huge.


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