Traders’ Talk

Excerpts from the Avid’s Live Chat Room…

What does the future hold? My bet is ~1300 SPX in the fairly near future. Then most likely new highs after that. But I reserve the right to change that forecast. : ) It is certainly interesting, and confirms suspicions about the nature of the selling, that as soon as the NYSE closes, the futures rebound somewhat. Often it is the futures that push the market around. But not in the past couple of weeks. Institutional selling becomes a fundamental piece of information for the Futures camp, there is nothing you can sell that cant be sold.

The present situation is not exactly ‘business-as-usual’. But my current judgment is that there will not be a huge impact on the aggregate economy from what is happening. I.E. we will not see two consecutive down quarters in real GDP. The Federal Reserve was created for the very reason that an institution like the Fed was required to stabilize things when discontinuities like the present happen. There had been so many of theses kinds of events in the 1800s, which did have fairly serious economic ramifications, that finally in the 1913 (?) they created the Fed precisely for the present type of situation.

So, I expect us to weather this without a problem in aggregate GDP, but clearly there are a lot of entities that currently are short of cash and need to liquidate assets to raise cash. How long the liquidation will last is anyone’s guess. But SPX ~1300 seems like a sensible number to me. Although I have to say that my degree of conviction about GDP in the immediate coming quarters is appreciably less than it would be without the present ‘mess’. But my point is that it depends on who it is that is selling that explains PREM. Or if you like, PREM gives some information about who it is that is selling.

This time it is not the futures people who are applying the selling pressure. Let’s put it this way, if the Fed wants a recession it would have no trouble getting one going. But if the Fed doesn’t want a recession then all the gods in the universe combined would have their time cut out trying to create one. IMO