Monday, September 17, 2012

Put/Call At Support Again

Contrarian indicators work only when there are no Central Planners involved. Nonetheless, Put/Call ratio is at 0.50 support. Equity longs are not advised at this level, unless Ben and Mario are on your side.
click on chart to enlarge

1 comment:

  1. central planners are too fallible to warrant this much respect. think of central planners like the Fed as a whale in the market. if the public buys into Fed worship, their dictates become a self-fulfilling prophecy. but when the public doesn't play along, the Fed can get caught in its own web. JPM (CIO) showed us earlier this year just how vulnerable a (London) whale can be when they dominate a market and can't dump their book onto the public.

    So the rumors (or leaks) of QE by the Fed have been buzzing since at least June. By September, QE had already become the world's worst kept secret. everyone and their mother was front-running the Fed, bidding up stocks and bonds on anticipation of QE. Predictably, the actual announcement was merely the climax of the rumor cycle. Institutions and smart money bought the rumor and sold the news. Institutions talked their book and are now unloading their inventory on the public.

    While the sell-side looks to lock in profits on the QE rumor cycle, what is the buy side doing? The buy side sees global growth forecasts revised downward, employment anemic at best, PMI and regional manufacturing and durable goods orders contracting.

    this is to say that I would revise your statement that contrary indicators only work when there are no central planners. central planners' swing trades can only be profitable when they have a confident investing public. When the public shows signs of no longer being willing to buy the Fed's assets or overvalued stocks, even the most profligate central planners will be powerless to juice the economy. And the Fed, like the London whale, may find itself with a balance sheet that can't be sold except at a great loss.