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Monday, June 15, 2009

Market trading in tight range

The blog Zero Hedge has been some serious allegations that the federal reserve has been illegally manipulating the financial sector using an isolated trader to channel funds/market intervention. It of course, is all unproven allegations. Even if true, I really doubt the government will enforce the law, since, such an action if made public would crush the financial markets.

However, if true, and the rumors are now out there, I would expect the fed to quietly pull it's money out to cover it's tracks. Which is fine for the short plays and lottery tickets. And will help reduce interest rates. In any event, lets look at the "reality" rather than conspiracy stuff.

Zero Hedge posted a pretty good summary
of what the US is facing, and it depends on the Fed actions. Since September 2008, pretty much the government is the biggest manipulator/player of the capitalist stock market. Therefore the possible actions of the government must always be thought of. And this is with discounting the tinfoil hat of illegal manipulation. If that is true, then the government has such influence, it is hard to comprehend the impact.
1) Government tightens finances, interest rates fall, natural resources fall, dollar strengthens
2) Government continues easy financing (or accelerates it), interest rates rise, natural resource values explode, dollar falls.
3) Government tries to tred water, which is still #2, but more drawn out.

Since #2 is possible, this is why I am keeping my gold miners, but it is possible I will lose substantial profits over the course of the next few months, before the miners rally hard back.

Market Snapshot

There are three primary financial indicators I have been watching, the SPX (S & P 500), TNX (US Treasury 10 year interest rates), and GDX (Gold miners). There are of course a dozen other indicators that are very significant, such as the USD value.

So lets look at the big elephant in the room, interest rates. This single variable will force the hand of the US government into action. On Friday, we saw rates come down a little. This could be just a 'break" from the bull run, or a trend change. It maybe that "big money" is pulling out of the market and parking money into US Treasuries for safe storage. In any event, if the market continues to rise, I would expect interest rates to resume their climb.

From WebSurfinMurf's Financial Blog

Next up is the S & P 500, (SPX). The market has been trading in an VERY unusual tight range. Basically 30 SPX points out of 950, thats basically flat. The market HAS to eventually break out of this range. I am banking it is down, but if up, it is going to hurt.

Notice that when I posted to sell the longs and start getting short on 5/10/09, SPX hit an intra-day high of 930. Notice here it is 6/15/09, over a month later, and the market is still trading around the 930 mark. (925-955). The market is no "better" off than when I made that post. Frankly, until the SPX closes outside of this range, I really can't comment on market direction.

From WebSurfinMurf's Financial Blog

And finally there is the Gold Miners. I posted back when GDX made new highs on 5/31/09, to look to buy GDX if/when it hits 38. I have since revised (due to trend line/time) to 37. Gold miners are retreating, and I am trying hard to not buy more until I see 37 in GDX.

From WebSurfinMurf's Financial Blog

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