Friday, August 21, 2015

More on the "remember Ebola?" tack

By way of illustration of the environment, here's some weekly candles for you:

The last time QQQ touched the weekly SMA(50) was when Ebola exterminated America last fall.

The last time SPY broke below the SMA(50) was when Ebola exterminated America last fall.

Which one the one hand, psychologically, means that if either goes lower this time, there's really something broken and you could reasonably expect the indexes to fall real big this time... like maybe another 10% at least.

But on the other hand, both Shaoul and Rosie think housing construction and sales is about to really take off, and the US car fleet is still unsupportably old, and both of those are huge contributors to US GDP and employment, and unemployment is still low, so whatever happens you have to be an idiot to think the US economy is about to do anything that would demand a lower stock market.

And "be an idiot" includes thinking that Janet Yellen is going to do anything to destroy the US economy. Don't worry: she's heard of Jean-Claude Trichet, she's read the Fed research on the dislocation between unemployment and inflation, she knows enough currency theory to understand the yuan move. And you probably don't, mister Hedge Fund Clown.

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