Wednesday, March 7, 2007


Tuesday was pretty unimpressive to me as there was no news to indicate the causes of this correction have been obviated. No favorable inflation news occurred - in fact the high Q4 unit labor cost number was nominally worrisome although it's probably overstated by year end bonuses. The productivity number was low, imho. So Fed rate cuts are off the table without a big downturn, which would be bad for stocks. And further bad news on inflation might even bring the Fed back into play. This is a risky point in market "phase space". "Phase space" in classical physics is a multidimensional space comprised of position & momentum. For the market, it's the concept of the markets level and its trend. The level of the market is not at any logical stopping point for the correction [see recent post] and the trend seems down. News can change this but we have none. Monday could just be a "4" wave of a 5 wave down move [cf. Elliott Wave concepts] which would be appropriate for a major correction. Shorting this bounce for a short term trade is very tempting.

Still, the higher close means this is an IBD "Day 1" - see & subscribe. I'll probably do nothing & wait for news and a new intermediate term trend to develop. On more bad news I'll try a short in futures if I am nimble and at my "turret" if it hits.

PS: changed my mind & started a S&P short futures a little before 6 AM EST. The 5 minute chart looked tempting. I won't take much of a loss as this is a quick hitter.

PPS: oh well. I covered that for a small loss when the futures held green a few minutes after 10:30 AM EST. I've used that sign as a "tell" for awhile & am following the sign.


mern said...

the charts dont look much better. we sure seem to be in a stagflationary environment, but ive been saying that for about 3 years. lol

still thinking no way the fed can cut with the secular winds blowing into its face.

Bunkerman said...

Yeah, I know you've been touting the stagflation line for awhile. I'm starting to wonder if we aren't seeing a whiff/spark/nose of the camel of that now. The low ADP jobs number is another sign.

I agree re the Fed - no cut no way unless core year-over-year inflation goes down.

mern said...

“The volume swings we've seen over the past week have been pretty incredible. We've seen two 10-to-1 down volume days on the NYSE, now we're getting the opposite with a 10-to-1 up volume day. I can find 10 other similar situations in the past 60 years. A week later, all but one were positive, by an average of about +1%. The lone exception was 10/21/87 which signaled the initial recovery from Black Monday. Similar to that instance, at some point most of these intense volume reversals ultimately went down to test the momentum low after a little more follow-through, and most of those tests were successful as they formed major market lows (August 1990, October 1987, November 1978, May 1970, June 1967, June 1965, October 1957, March 1955, May 1947 and January 1947).” Professor Jason Goepfert on yesterday afternoon’s Buzz.

Bud said...

No way? What if Mr G is right...and a recession is coming?

Bunkerman said...

Very interesting data, mern. Thanks.

Bunkerman said...

Uh Bud, Mr. G said recession was a 1/3 probablity. That means 2/3 no recession. ;-)

Stagnation (= very low growth under 2%, not recession) with high core inflation means no cut.