Not Over Yet...

The market predictably bounced from major support just below the 1,250 level in the SPX, but it's hard to see how this can represent any sort of meaningful "bottom"... The World Cup is just around the corner, and if you are a football-mad investor, you are probably going to make sure you won't spend the majority of your time in front of the computer screen. Hence, I think volatility will continue to be high and liquidity will dry up. Which means one thing: small sell (or for that matter, buy) orders will start pushing this market north and south, like there is no tomorrow -- with the likely direction of equities down. Risk reduction continues. I sense a lot of the big long-only elephants haven't even begun to reduce their exposure. So more trouble ahead? It sure looks that way.

More Like 5:0 To The Market...

I've been off for a few days and lo and behold, the "fakeout" I talked about in my last posting has developed into a full-blown rout!! This is MORE serious than just a "healthy pullback" -- that's right, this may well be the start of a much deeper correction, which would eventually take us down to below the 1,200 level in the SPX (which would make it a 10% correction -- as I surmised earlier -- from the highs just above 1,330).

We have seen capitulation and liquidation of all profitable (consensus!) positions out there -- from $ and bond shorts, to commodity and equity longs!! It's fast and furious as well, so don't try to catch a falling knife, please - you've got macros and long/short funds in real distress here, pushing this thing down...

Yep, Fakeout It Is -- 1:0 To The Market

All I can say is: thank God I am not in this whipsaw market. Whenever equity bulls get too worked up about rising prices, this is exactly the sort of day we need to pour some ice water on their hot "we are so bullish we could cry" feelings. On Monday, I made the same point, thinking that the recent equity gains may well turn out to be nothing more than a first of many more to come "fakeouts". The strong headwinds remain and I just don't think the inflation scare is out of the way yet (have you seen commodities lately?). Tread carefully here. This may well be the beginning of a significant equity markets correction.

Breakout or Fakeout?

The S&P 500 index seems to have made its mind to go higher, no matter what geo-political and structural/earnings and/or Fed tightening concerns there may be out there. Friday's was a very positive weekly close, but one early bird doesn't a sunny spring make. So let's see how this month turns out to be, because equities are still facing some significant headwinds, going forward. In fact, there is no evidence to suggest that when the Fed does stop or "pause" raising rates, equities are supposed to go higher. The inverse may in fact be true. I don't trust this "breakout" yet and will sit on the sidelines until I convince myself that this rally is for real.

The Dollar Looks Worse By The Day...

After falling another 2% [against particularly the yen, euro and the pound] since I posted those comments last week, the dollar selloff looks to be done for now (short-term), before the Fed meeting next week. However, we are a long, long way from wanting to buy the greenback. It may just be a period of consolidation before another leg down. To the best of my limited technical analysis abilities, I see downside to 109 in the $/yen and upside to 1.2750 in eur/$ (weekly closes), before the dollar bulls can perhaps emerge from hibernation. Six months ago, dollar bears (including me!) could get no respect -- now, they are definitely back in fashion!