Monday, January 21, 2013

Nemo's Findings week of 01/20/2012

(Course on chart pattern recognition is available now:

Well,the beat goes on....up and up and up we go...Indexes closed at the highs, and actually continued on after the close.  With the inauguration on Monday, we likely gap up on Tuesday.  Here are the charts from the past week.  The shaded areas are places I plot where there is approximate confluence between levels:

The VIX just continues to drift lower, nobody feels the need to hedge.  You can almost feel the euphoria building. Economic news has continued to be nominal to good.  A few hiccups here and there so far on earnings, but generally they've been good.  From the short term trading point of view, everything is hunky-dory.   We get gap ups every few days that create overbought conditions, then we get a few days of sideways action to correct through time.  So, what can go wrong...

In the short term, we have the debt ceiling issue.  Kabuki theater if you ask me.  Republicans are neutered, walking around with their tail between their legs.  I always say the best political solution is usually not the best operational solution.  Given their political leverage (which is nil) the best political solution would be to give in to the democrats and let them do what they want, because the majority of the US wants what the democrats want.  It's that simple.  As Churchill said, best argument against democracy is a 5 minute conversation with the average voter.  We are a relatively socialistic nation that taxes as if we're capitalistic.
So, in the short term, nothing should derail the market fundamentally, other than garden variety corrections.  This market has been correcting through time as opposed to price, that is really strong.  The only thing easily visible on the horizon is the Feds recent commentary that withdrawing "stimulus" may be sooner than later, but what happens to the markets when they try to withdraw?  How can we afford to finance our debt if interest rates increase?  This whole period has been an experiment that is not yet ended.

Now does that mean something more immediate can't manifest and cause problems?  Of course not.  Well, here's the week that is...