Tuesday, December 16, 2008

End of Day/End of Cutting Rates - 12/16

“Wow, man – that’s some awesome stuff, dude,” says the drug addict just before he hit the floor!

The DOW finishes the day up 359 points, the S&P up 5.1%, the NDX up 5.2%, and the RUT took the biggest toke, up an “elevating” 6.6%!

So, with rates now at zero, small caps and real estate soar, especially now that the FED is saying “print” in no uncertain terms by buying up agency paper and mortgage debt. What a wonderful day to be an American! Boy, am I ever sorry I’ve been doing mostly right things. Why would you save money? Why would you pay your mortgage?

So, how long do the drugs last? Not long, I suspect, this will be the hit that puts him on the floor. “Quantitative easing” is all that’s left. Just remember, if they make the numbers bigger this year (unbelievably massive), then they’ll have to make the numbers even larger the next. When does it end? Soon, very soon.

SRS closed at just $61! IYR gained 12%, the XLF gained 11%, and GS (who just LOST $5 per share) gained 14.3%!

Here’s a 30 day chart of the VIX with a close under the triangle. Throwunder? Looks significant, but we’ll see what tomorrow brings.

Below is a 30 minute SPX chart. Note the stochastics is overbought, making some decline likely. We broke back inside the wedge as defined by the light blue lines and note that we closed near the top of the little channel we were in the day before yesterday.

Now, when we zoom out for a 3 month daily view, I can now see what appears to be 5 waves up (wave e) off the 11/20 bottom – however, we have not broken the 12/8 high (this could also be the start of C up of 'a' up). Also note how the fast stochastic has turned up and this did produce a buy signal on the NDX. Note on this chart that there is quite a bit of resistance at the 940ish area – upper Bollinger Band, and a convergence of trend lines.

Internals were decidedly positive with advancers over decliners by about 5 to 1.

All-in-all, in keeping with wave ‘B’ up, but OMINOUS from a fundamental perspective. There will NOT be another POP like this from the next FOMC meeting – guaranteed.

You are now betting that they can create ever bigger numbers to inflate your debts away. Not only did Bernanke NOT study history far enough back in time, but evidently he failed second grade math.

We have an economy that is out of control and careening off the road while the driver punches the accelerator in a desperate attempt to keep it on the road. Remember, “It’s contained.”