Only two days is what it took to erase nearly a month’s gain. We are almost at the same place where we were on April 17th. The picture is not rosy and every main stream media has just turned bearish. What has changed in just two days? A lot but nothing that was not known. CPI and PPI are useless as lot can be hidden behind the numbers. I won’t talk about that here as many more fellow bloggers are writing much better. Both S&P500 and Dow kissed 200Days MA and seems like saying bye bye. Both have dropped below their support level that I have been watching and mentioning for long time.
So what’s next, change in strategy! Change for a bearish bias unless both Dow and S&P crosses the key levels. I will be cautious here.
UBS is offering a hefty 31% discount to raise $15.6Billions. Sorry SWFs. You may turn out to be smart in future but not anytime soon. It’s going to be very rough ride. Oil is kissing $135, I wonder what Dr Irwin and credit suisse has to say about this meteoric rise in oil prices. According to NewYork times, American airlines (AMR) is forced to charge $15/bag, it will eliminate 11-12% of seats, it will retire 85 aircraft. Not good, spells for stagflation, the worst enemy of markets per se. Embrace the change and start to love it, that’s the recipe to survive. There is no other secret.
The fact is that world’s landscape is changing, slowly but truly and it’s changing big time. There is a whole new population coming on-board that wants to make decision and drive change. Get ready for it. A simple investment philosophy- Invest in whatever 1/3 of rising prosperous population needs. No detailed reports, no P/E, no DCF modeling and no consultation to highly paid investment advisers. There will be ups-n-down along the way, but I do think “That’s the way”…just simple basic needs.
Has the market already discounted the bad news, my bias is “yes” unless some other big surprises are in the store. Collective wisdom at the market knows that inflation is running high, no matter what government statistics tells you. They know earnings are going to be bad. Nothing is a surprise. What I am not seeing though is the buying activity. Volumes are generally larger on the down days than it is on the up days. Both Dow and S&P500 had tough time to comfortable sit above 500/200 days averages. All the morning gains disappear by the afternoon. I interpret it this way that institutional money is on the sidelines.
Where are we going then, your guess is probably better than mine and that’s why I would like to be protected on either side, as much as possible.
Have fun and prepare for a different tomorrow,
Profitable trading, OP