Rumours are out that Italy is about a receive a 600 billion euro bail out from the IMF. The risk markets all gapped up, from Copper to Euro and from S&P 500 to Aussie Dollar and Crude Oil. I'm not buying the news. I do not think IMF has that much money. Last I heard they had about 300 billion Dollars at their disposal. It seems the politicians are panicking now...
Yes, the markets are extremely oversold and yes, you shouldn't engage into any shorting activity right now because risk to reward is very skewed unless we have a full blown crash. But at the same time a decently large gap up in Asian mornings usually spells trouble as the market pulls back majority of the time, so don't rush into anything just yet.
On top of that, a massive 2% gap up on Monday morning during extremely oversold markets in the middle of a European crisis is a perfect recipe for the bulls to get taken to the cleaners. This reminds me of of April 2010, when Greece was bailed out for the first ever time and the Euro gapped up. Few weeks later we had the final climax crash and eventually a real proper bottom.
This is a sling shot rally from oversold conditions based on hope and the gap is massive. If, and I say if because I do not know what will happen, but if the IMF doesn't come through with the deal and Italy's bonds spike above 7.3%, the sling shot could revert back towards the other side with twice as much force. Be careful here!
Looks like the market left the station a day early. See previous post as well.
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What a huge gap up! Power rally right here that has 99% of the S&P 500 moving on the upside.
ReplyDeleteThe financial people are crying for QE3:
ReplyDelete"Dealers See Fed Buying $545 Billion Mortgage Bonds in QE3"
"Failure to Extend Tax Cut Could Push Fed to Do QE3"
"QE3 expected by March 2012 - SocGen"
"Will the Federal Reserve Implement 'QE3' This Month?"
"Washington Gridlock Could Push Fed to Act on Economy With QE3"
"Fed Minutes: Bernanke Firmly In Control Of FOMC, QE3 Coming"
"GDP Slashed, Supercommittee Fail: Bernanke To Unleash QE3 In 2012"
...
Come on Ben! Just do it! :)
Yeah a lot of investors are expecting it or at least talking about it. So I guess, majority of the time, disappointment occurs first.
ReplyDeletePersonally, I am still fine being in cash, because majority of the asset classes are declining against cash right. So in other words, cash in "rallying" against everything else. I would like to see even more selling and no QE3 just yet, so that I get lower price entry points for my shopping list and that Treasury Bonds go even higher, so we can short the bubble and make a killing!
That is my wish anyway haha!
Mr T:
ReplyDeleteYou answered my previous question here.
Maybe a pilot position ot two would be appropriate just in case the train is leaving the station now and not to be left behind.
Zero percent interest rates in the US and people are worried..........shoot me now please and end this quickly.
The train will not leave, until we bottom properly. If you have some market memory about previous proper bottoms, depending how long you have been doing this for, than draw on those memories. Look at late 2002/03, late 2008/09 and mid 2010 for some clues.
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