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Registered User
Joined: 12/19/2004
Posts: 457
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It looks like there is a sucker born every minute on Wall Street.
Today, we have the markets up on the release of slowing GDP data, suggesting the Fed is likely to pause in August, despite the jump in core PCE.
To get a grip on the market action, all one needs to do is look at a chart of the SP-500 before every Fed announcement. For all of 2006, bulls have been predicting "one and done" for the Fed. For all of 2006, bulls have been able to push the market higher before every Fed announcement. Each Fed announcement has left them disappointed, and the market sells off. Take particular note of the decline in May. It started just 2 days after the Fed announced its policy statement.
Here we are, 3 hikes later, and the bulls still push the market higher before a Fed announcement, hoping for a pause in rates.
Regardless of what the Fed does, I'd say the chance of a sell off in the markets are over 70%. Fed funds have already priced in a pause. Stocks have already priced in a pause. Much like in May, we are likely to see a sell off after the meeting. Should we get a pause, then the market can worry about lower earnings growth in future quarters. Should we get a hike, that will clearly disappoint the market, particuarly if the Fed comes out hawkish.
Being long looks like all risk for little reward.
From an Elliott POV, I'd say we are nearing the end of a triangle (August 2004 thru July August 2006) in the SP-500, with the action from 6/13 thru next week being wave c of E, which I see as a flat. Volume continues the pattern of a general decline on price rallies, and expansion on price declines, a bearish omen.
We could rally into next week, with a likely target around 1290-1300, give or take. But that is a rally to get short, IMHO.
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Registered User
Joined: 3/7/2006
Posts: 244
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RMR,
Your analasys leaves out one important factor, and I disagree with your statement that the bulls have been saying one and done for all of 2006. I'm not even sure where you're getting that from. Every prediction I had heard was to the contrary. I've heard people say they HOPE it's one and done, but I've not heard PREDICTIONS of one and done until this month.
To take it further, it would have taken a true fool to predict one and done when the bond market was clearly predicting a raise in rates AND the fed had clearly indicated a tightening bias. There was simply no reason for any competent person to predict one and done.
The important factor you leave out is the fall elections. I think it's unlikely Bernanke will raise rates going into the elections unless it is absolutely necessary.
Am I saying the market is going up? Not necessarily, but with all due respect I do think your assessment is flawed. I will also add that I am starting to see signs of buying in some of the indexes.
As to the elliot wave, I'm not an expert in that, but I will say that I've yet to be impressed by it.
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Registered User
Joined: 11/12/2005
Posts: 2
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I don't feel we have seen the devastating affects of the series of rate hikes.
Years ago I heard a commentary on Elliot Wave: There are three people who have figured it out; one's dead, the other is crazy and the last is not talking!
It's too complicated for me.
I do read the posts of one, on another board, that feels he has a grip on it though.
Bid
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Registered User
Joined: 3/7/2006
Posts: 244
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QUOTE (bid83)
I don't feel we have seen the devastating affects of the series of rate hikes.
I do agree with that. I think we are at a pretty significant risk of a recession. I have for a few months now. I just cannot figure out why the FED has to consistently go too far with rate hikes. How friggin hard can it be to figure it out?
A recession would most likely be good for the market, once the fed starts lowering rates.
This may sound trite, but I can consistently predict the economy 3 to 6 months down the road. All I have to do is call a friend of mine that has a boat company. If he's selling boats, it looks good. If he isn't, I know a slow down is coming. Laugh if you want, but it's been 100% accurate for about 20 years now.
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