Today I had some time to watch Bloomberg on TV. Yeah I do watch some news from time to time. And it really hit me what and who really uses fundamentals. For us small fry, we can rely on services to provide us with some of the info, but realistically, unless you have the means to understand the industry, the accounting and whatever else that is included, then really, fundamentals is useless to you. Don’t get me wrong. Many people are able to trade successfully on fundamentals. I’m sure there are. But who would know everything about the fundamentals, government policies, events and the like and piece it all together than the market makers? Back to idea of resources. They have the resources to gather all that information.
Peons such as us only have Cramer, CNBC, sexy Fox and Bloomberg and all the other services. The problem is, they are always late. Early this morning on Bloomberg, a headline read to the effect that the American futures rallied on rosy statements made by Bernake on the economy. Later on that morning, market drops. The headline disappears and replaced by Bernake’s statement about employment. I love reading the headlines in the news and watching the news before the market opens. Almost always, when the news reporters are excited very bullish, it is the time to start shorting the market. And when they are gloomy, is when you should consider going long. Sounds comical, but most often true.
Ever given thought to the Goldman accusation, that when the company was going short on some stocks, they told their customers, well “recomended”, some of their customers to buy said stocks. Please buy this stock because we are exiting our long positions to go short. We will provide the liquidity you need to take out all of our long positions. I don’t know if that is how they decided things would work, but that is what is necessary for a distribution to happen based on bad fundamental findings on whatever entity will be traded. As the news breaks about the not so rosy fundamental aspects, the market or stock is primed to drop.
Now back to the main topic. Fundamentals.
In all truth, the basis for the market moving the way it does is truly based on pure fundamentals. Market makers and large institutions are responsible for setting up the market for whatever it does. Since they buy and sell just like we do or make available the necessary liquidity to move the market one way or the other, we can track what they are up to from our charts.
We poke fun on the funnymentalist traders out there because they always talk about the news. How this news made it drop, and how this up and coming news will make it pop. Really, when they talk about the fundamental reasonings behind it, for the most part we cannot disagree provided it isn’t some red neck explanation. We feel sorry for them because, they don’t get that the setup for the resulting pop/drop, was predestined before he even heard the news.
What is a red neck explanation?
The economy is going to tank because Obama is a socialist.
Why is this a red neck explanation?
Democratic party usual platform is based on social handouts. To make it so that it is specific to Obama is red neck. People usually elect the democrats when there is an economic issue because they want to make sure they get some government help. Not usually a republican stance. It is what it is. Some of the pictures of Obama and stories that are circulating in the internet is beyond red neck. I remember back in the last presidential election on Good Morning America. A lady was asked if she would vote for Obama, and she said, she wouldn’t because he isn’t even American. ROFL!!! Can you believe that?!!
The decline really started back in June 1, 1999. Now based on buckets, who has control of the market right now? Now consider the fundamentals. If the economy is turning for the better, what is necessary? People will have to have a lot of disposable income. In order for that to happen they have to have jobs. In order for that to happen, companies must be able to get loans to get money to hire and have someone to sell to.
Has any of the required been met since the market popped rapidly from March 09, lows? No!!
Now, I’m not an economist by any means. I’ve only had the standard Micro/Macro economics classes, however, one can deduce certain things that comes to play. Since the 90s the world has become a much smaller and connected place. Products arrive from any place to anyplace. Third world economies receive influx of companies to help educate and build their manufacturing and production capabilities offsetting labor cost in originating countries and keeping competitive advantage. Everything sounds good so far until you notice the trade deficits. Why is there a deficit? Although by moving manufacturing to underdeveloped countries, we help increase their output, however, their economies are still unable to purchase our own products. Supply is high. Consumer consumption globally is lower. I’m leaving it at that.
Technically what must happen in order for the market to return to bullishness?
We need an accumulation to start up. We would require the market to produce a failed new low or new low on more bullish volume. What price are we going to test? March 09 lows, the previous low. For a new low, it may take us down to 477-456ish in this SPX monthly chart. Scarey!! After that 419/20 then 385/86 yikes!! So what do we know about the market when it is so one sided. When they sell. They sell. My lines may be a bit off. My allergies are so bad, I can’t have my contacts on and too lazy to look for my glasses, but I think I’m in the ball park. A technical perspective.
It would be nice if we stayed above 900 on this next drop down. Facilitating an accumulation from that point on, but the bulls must not allow it to dip past the previous macd low. The weekly not comforting either. Nothing showing turn around. If we do pop, we will just form a triple top. I hope I am totally wrong.