Winds of Change

The market is not acting as strong as it used to.  It just feels heavy.  Lack of capitulation, but steady selling.  It needs a QE, which is the only thing that will save it.

The global economy is hooked on cheap money and QEs.  But the problem with this is that to get a fix, the economy has to be weak.  More specifically, the stock market has to be weak, because we know central bankers are nothing but stock market jockeys.  They pretend to look at all the data but they only react to one:  stock prices.

It is not what you learned in Finance 101, discounted cash flows of companies don't matter anymore.  It has turned into a pure money game.  How much liquidity will be pumped?  That's all that matters now.  But the problem is that you get diminishing returns on liquidity as you do more and more QEs.  Eventually, all you end up doing is increasing inflation.

We are still up on the year, there is no way Bernanke provide put protection here.  Its still out of the money.  My bet on the strike price is between 1100 and 1200.  We'll see.  Maybe with the election and Bernanke doing anything to improve the economy and prevent Romney from getting elected, he might raise that strike to 1250 and really piss off the Republicans looking to get rid of Obama.

I remain bearish, we can perhaps make a buyable low on Friday if we get down to 1260-1270.