The durable goods order came in mixed and the Senate will vote on the spending bill today. Those are the two big stories and the market has adopted a wait and see posture with a mixed opening anticipated. The issues before us are little changed and such is the day to day world of Wall Street trading. The larger issues (where is the market headed) require a look back to the important economic events of the summer. Yesterday, in our super research committee meeting, the focus of the conversation focused on the Fed. There is no question that this has been a QE market advance. As long as the Fed has been willing to throw money at the economy and interest rates remain low and inflation benign, the market has had a green light. The fly in the ointment is that, until last week, we heard very little from the Fed. They signaled back in July that tapering was probably and then last week pulled the plug on that pronouncement by leaving QE intact. Bernanke’s reasoning for the lack of Fed tapering was that the economic data along with Congress being hamstrung by politics did not support GDP growth. As a result, the Fed did not feel that this was the right time to throw a wrench into the economy by pulling away access to credit. The vote today, we suspect, will validate Bernanke. The politicians simply cannot get it together regarding any kind of a deal and it is all centered around defunding Obamacare. The conservative republicans will not back off, and the idea is gaining traction with some of the more liberal Republican members of the Senate (although not enough to get it done). The result is stalemate, and that, we believe is what Bernanke saw. We have frequently reminded you that markets hate uncertainty, and we are hard pressed to think of much that is not more uncertain than a default on America’s obligations. Nobody knows the impact of that (but it can’t be good). The market has backed off of the Bernanke rally and the distribution count (of most import to us) is now at 3 on both the NASDAQ and the S&P indices. While not at a level where we would consider not participating; it is worrisome. If the distribution count continues to rise, we are ready to go to cash. We are feeling some negativity regarding the consensus in the marketplace, and, while we try to not give much credence to the noise, it does necessitate a careful monitoring of money flows. If it comes out of the market over the next week or so, so will we. This and/or the accompanying information was prepared by or obtained from sources which DFE believes to be reliable but does not guarantee its accuracy. Any opinions expressed or implied herein are not necessarily the same as those of DFE and are subject to change without notice. The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instruments or to participate in any trading strategy. The investments or strategy discussed may not be suitable for all investors. Past performance does not guarantee future results. Sale of option contracts can be risky and may not be suitable for all investors.
Posted on: Wed, 25 Sep 2013 13:34:10 +0000
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