The "sleepy holiday" theme in the market continued last Thursday and traded as if it had been a half day. Although it was a full day indeed, the total range in the mini-SP was just 5-points. The market was closed Friday.
The "sleepy holiday" will certainly continue this week. Friday the 31st is New Year’s Eve and many traders will take several days off, if not the whole week. Currencies, interest rate products, and many commodities will close early Friday; however, stocks will have a regular close.
The market’s volume had been amazingly low going into this holiday period, as I have mentioned often, but now it is even lower. I have also said that that is an indication of a potential turning point moment - but the market continues to rally. Moreover, retail investors have withdrawn money from equities for more than 30 consecutive weeks - but the market continues to rally.
Here are a few thoughts from a man whose job it is to watch the buyers and sellers…and even he does not have an answer to the gravity defying ascent of equities (other than money going into ETFs).
http://www.cnbc.com/id/15840232?video=1707879407&play=1
Following that appearance on CNBC, Mr. Biderman posted this postscript…
Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets - currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?
What the Fed is hoping is that QE2 actually works and the economy starts growing at 3+%. If that happens, unlikely as it is, then the Fed will end its QE activities. But for the stock market, if the only source of buying power, the Fed, withdraws its support, the market is likely to plunge to well below fair value. At that point perhaps some new source of money, i.e., China, et al will be able to buy US assets on the cheap.
The Fed is legally mandated to manage the economy, not the stock market. If the Fed’s QE is successful and the trickle down impact of higher equities creates a sustainable recovery, the Fed will gladly sacrifice the stock market to its legal mandate to manage the economy.
A more likely outcome is that while stocks will be higher by the end of QE2, economic growth will not be sustainable without government aid. That would then require additional QE. Stock prices could then keep rising for a while. At some unknowable now moment in time, unless the economy starts to grow again, no amount of QE can work forever in keeping the current stock market bubble from bursting.
The "sleepy holiday" will certainly continue this week. Friday the 31st is New Year’s Eve and many traders will take several days off, if not the whole week. Currencies, interest rate products, and many commodities will close early Friday; however, stocks will have a regular close.
The market’s volume had been amazingly low going into this holiday period, as I have mentioned often, but now it is even lower. I have also said that that is an indication of a potential turning point moment - but the market continues to rally. Moreover, retail investors have withdrawn money from equities for more than 30 consecutive weeks - but the market continues to rally.
Here are a few thoughts from a man whose job it is to watch the buyers and sellers…and even he does not have an answer to the gravity defying ascent of equities (other than money going into ETFs).
http://www.cnbc.com/id/15840232?video=1707879407&play=1
Following that appearance on CNBC, Mr. Biderman posted this postscript…
Due to time constraints, what I didn’t get to address on CNBC today is what will happen after the Fed is either successful or not successful with QE2. The Fed is rigging the market by digitally creating money that is used to buy financial institutions assets - currently Treasuries, last year all kinds of toxic waste. What will happen when the Fed stops buying assets?
What the Fed is hoping is that QE2 actually works and the economy starts growing at 3+%. If that happens, unlikely as it is, then the Fed will end its QE activities. But for the stock market, if the only source of buying power, the Fed, withdraws its support, the market is likely to plunge to well below fair value. At that point perhaps some new source of money, i.e., China, et al will be able to buy US assets on the cheap.
The Fed is legally mandated to manage the economy, not the stock market. If the Fed’s QE is successful and the trickle down impact of higher equities creates a sustainable recovery, the Fed will gladly sacrifice the stock market to its legal mandate to manage the economy.
A more likely outcome is that while stocks will be higher by the end of QE2, economic growth will not be sustainable without government aid. That would then require additional QE. Stock prices could then keep rising for a while. At some unknowable now moment in time, unless the economy starts to grow again, no amount of QE can work forever in keeping the current stock market bubble from bursting.
Trade Date: 12/23/10
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