Thursday, February 11, 2016

Not trying to cause a panic, but it's time to FREAK OUT!

Just kidding, relax and take a deep breath.

Global markets are under severe pressure and the numerologists...um, sorry Technical market analysts are running the show right now.  If you remember last week I said the number that everyone on Wall St. was worried about was 1812.  This represents the low of the S&P 500 way, way back in Jan 2016 (yeah, three weeks ago) and it seems like the programs want to retest that number (futures are bouncing around but were 1814 last I checked).

A significant break below that level and I don't know what the machines will unleash but it may not be pretty.

So what's driving this latest move?  I'd guess it's some pretty vague "sentiment" like

* Concerns about Central Banks having few policy tools left

or

* Fed Chairwoman Yellen's comments yesterday which almost asked the market to crash.

Okay, so that's probably a bit extreme, but in a nutshell this is what the head of the Federal Reserve said -- if markets were to continue to swoon, the Fed could consider reversing its plan to tighten.  This is code for "if Wall Street wants more free gov't cheese in the form of lower rates or direct intervention, stocks need to go lower first".

The market and global economy are acting very much like they did in 2013 when I first saw signs of weakness.  What I did not expect was that the Fed would come to the rescue once again as soon as equity prices dipped.  The major investment houses are about to call the Fed's bluff again - will the Fed come to the rescue for the umpteenth time and more importantly, will it even matter to the markets?

Today might be a wild day as the Fed Chair Yellen will be speaking throughout the day while the markets continue to gyrate.

** Update: This is how crazy the markets have become - in the past 30 minutes before the markets have even opened, buyers have flooded the market assuming that this dip will be sufficient to induce the Fed to act and the futures are well off the lows of the morning.  Good luck trying to figure out how this relates to the actual value of a company anymore.  The stock market is just game of 1's and 0's for the computers.

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One final note that I thought I should mention.  When it comes to predicting the outlook for global trade and by default global economic growth would you rather listen to an economist who has never worked outside of a university (ie, most of the current Fed Reserve Bank heads) or someone who runs the world largest shipping company?  Hmm, I'll take the shipping CEO for $200 Alex.....

Well, the CEO of Maersk (you see their containers EVERYWHERE) told the Financial Times yesterday that "It is worse than 2008. Oil is as low as it was in 08-09 and freight rates are lower.  The external conditions are much worse...." so, that's something to keep in mind.

Cheers!


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