I quote from Mark Grant:
“It is the Great Game. They try to lure you into their various traps; I try to keep you out. They offer headlines from countless sources and I try to tell you what things really mean. They make use of a giant propaganda machine and I chant alone in the wilderness. They make up stories and present them as accurate data and I try to give you the facts. They want your money and I want you to “Preserve your Capital.” They are as diabolical in their pursuits as Professor Moriarty was in his. They are the political masterminds and I am a sort of Sherlock Holmes trying to analyze and conclude one case after the other. You may listen or you may not but I pay for my own supper while others ask for their compensation first. It is their Game, my Game; it is the Great Game”.
“Has all my instruction been for naught? You still read the official statement and believe it. It's a game, dear man, a shadowy game. We're playing cat and mouse; cloak and dagger.”
-Sherlock Holmes, A Game of Shadows
I could not have said it any better.
Bottom line, “ Cash”, at least till FOMC is over and we see the market reaction. I am very certain that the bearded one will not come up with candies for the market on June 20th but who knows. At least I am not taking any bet on the outcome and am content to sit it out.
Just like last Sunday, Euro spiked up and faded thereafter. But precious metal sector did not rally. Even when Equities held up for the day, credits was down and bonds were up. A correlation between SPX and Euro shows that the sync broke today.
Normally in such situations, either one catches up. Because of the market sentiment with Euro, I think in the very short term, there are less chances of Euro going up. Logically therefore, SPX will catch it downward but it may remain elevated till Wednesday. Question is how much down SPX will go from here? And therein lays the answer for week after. If SPX can hold 1300-1320 level this week, the next move would be higher. But that will be a bull trap, not a real up-move. More so if it comes without QE. If you are confused, just remember that we will have chop fest for the next two weeks but the selling is not over.
My take therefore is the same as last weekend. Nothing has been fixed. Market cannot go up without additional liquidity. Till that comes, the risk is to the downside in intermediate time frame although in short time frame, we may see higher highs. A heaven sent opportunity for the day traders but for a normal investor it is the worst kind of nightmare possible.
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