“So, here we are again. Fed policy has once again proved instrumental in inciting a commanding speculative Bubble throughout global risk markets….This is a dangerous period. Global liquidity is way too plentiful, while speculation has become too all-embracing and rewarding. Indications of monetary excess are everywhere. Indeed, we’re in the midst of the biggest financial Bubble in history (the “Global Government Finance Bubble”) – yet everyone seems comfortably oblivious….
Let the world adjust; just ensure that the Fed
keeps doing what it's doing. And I just scratch my head in disbelief at how
little we’ve allowed ourselves to learn over a turbulent 20 year period of
interplay between “activist” policymaking and serial market Bubbles.
After doubling mortgage Credit in seven years, our
system is now on track to double federal debt in 4 years. And the markets
couldn’t be more pleased with it all. It
leaves one pondering what type of circumstance will be necessary to finally
force us to start getting our house in order – to return to some
semblance of disciplined central banking and fiscal responsibility.” - Doug Noland,
Prudentbear.com, http://prudentbear.com/index.php/creditbubblebulletinview?art_id=10521 (Doug
Noland is the Senior Portfolio Manager of the Federated Prudent Bear Fund and
Federated Prudent Global Income Fund)
For
the past three days the S&P 500 has been trending down at a slope that is
typical of previous corrections. That
may indicate another break down this week, but I have no data on which to base
that guess. I have been suggesting since
the NTMS turned negative on 22 February that I believed the most likely
direction of the market in the near term is down. I still think we are headed down. Normally, I use “statistically significant”
days (large moves that meet a statistical test for both price and volume) to
help identify the trend. As I commented a
while back we have not had a statistically significant day since 16 March. That alone can be an indicator of trouble
ahead. (see my blog post of 4 April)
I
must say that the market action has been very unusual from my experience. There is little market direction probably,
because we have seen very low volumes for some time. It is always possible that we will continue
to trend sideways without a down turn, but I don’t think that is as likely as a
drop.
NTMS
switched to SELL on 22 February. Since
then, NTMS analysis has been Sell or Hold (it remained Hold today); therefore, I
am still conservatively positioned with only 30% invested in stocks.
