The RUSSEL (a better reflection of the overall economy than the S&P500) broke through the 50DMA as well as the 200DMA on Friday's shortened session. Markets had broadly ignored the Delta variant all year long but now, the MU variant of COVID has reminded us that this story is not over yet. Vaccines makers can't yet say whether these will be effective against the MU variant so there is an unknown factor that markets are paying attention to... re-closing of borders and further disruption to supply chains can't be ruled out at this point. On Fri the VIX spiked 22% from a level that had remained elevated by 5 units to where it was at the pre-covid highs, an indication that not everybody was, and even more now, not convinced that markets will continue to go higher. The next 2 weeks will tell whether the dip buyers or the fundamentals dominate. The Buffett indicated has dropped 11% from its 216% highs but is still 70% above historical averages. I remain net short and haven't yet entered any new long positions.
Powell has again shown the egoistic guy he is... Immediately after he got reappointment he departed from the expectation the Biden administration had of him and that were the reason that got him re-appointed. No surprise really as he did the same after Trump chose him, immediately he got the job he announced his now-famous "auto Pilot" interest rate increases. On a week that there is no new data releases, he changed his tune. Frank Lucas has gone as far as accusing the Fed of only looking at data that will give the wanted conclusion at any given time. Warren was right in calling him a dangerous man. Despite the method, I am glad that the Fed is now seeing that the $9t debt is a problem and that inflation is indeed real. With the Fed now seeming to no longer be supporting the distortion of markets, we might see the fund managers take back control from the retail Reddit crowd... Let's see what happens in the next 2 weeks, for now, I am watching and in no hurry to enter into new long positions.s
The technicians amongst us will know that the mean reversion rebound towards 35,900 (DOW) resistance was reached on the Friday session. We now need to see whether the corrective decline sequence will unfold. The technicals tell us that to complete the potential down movement corrective wave, the 35,900 level cannot be broken. I don't trade on technicals, so I had not entered long positions during the rebound so let's see if I goofed or if prudence will allow me to enter the longs below the 1st Dec lows as the fundamentals suggest.
Cool down, maybe the technicals match the fundamentals, that's basically what the post said (the last line).
When the inflation print is the highest it has been in 40 years and we are also told that removal of stimulus could bring down GDP by 3% yet markets rally, one must take a step back from trading. This is what I'm doing... no new positions for me for a while. Fun fact: Ark Investment, the best performing fund in 2019 and 2020 achieving this by broadly following the retail investor mentality with moon shots based on sentiment rather than fundamentals had dipped 21% in 2021.
Market valuations are beyond or cose or at the highest in history depending on how you look at it. The dot.com era was not nearly as broad as this Fed bubble. Markets are very predictable. All excesses regress to the mean, but before the regress to the mean it reverts to the other excess. That pendulum swings back and forth like it always has. https://currentmarketvaluation.com/
I think runaway inflation is here and Powell being the idiot he is will make a policy error warranting a 30% correction