Jan 6, 2005

Can't Shake those Bullish Vibes.

I have not posted for several days because I don't really have too much to add to the process. Lots of momentum stocks have broken very short term patterns while remaining in uptrends. Sentiment does not really seem to be leaning very strongly in one direction or the other from my perch.

I would like to talk about my thoughts leading into the new year. On Friday I sat for a while and really thought about how difficult it was to make a case we would go lower Monday or Tuesday. While I generally try to avoid the crowd my net opinion was that it was pretty directly comparable to Nov 3rd and that the end of one tax season and start of another in a consolidating tape would make the upside the winner. I would guess when we get flow information for the week we will learn that retail did not really show up. I would guess this little downside jog is mostly a correction of the short term sentiment and has left the tape in an alright position. I would still think we will get retail flows coming into the market that at the very least make me want to wait for rallies to sell.

I am gaining confidence in the idea that either the yield curve will steepen or stocks and corporate spreads need to correct. Given how widely manipulated the yield curve has been by foreign Central Banks I am leaning towards it occurring on the bond side rather than stocks. Whatever is happening the rising short end is creating a coiled spring effect where the long end will jump higher or the Fed will rapidly change course.

If I wanted to argue that it is the front end and spreads that would adjust I would focus on the consumers. They finally seem to be getting scared of their credit cards and general indebtedness. There certainly has been enough in the popular press about America's lack of savings.

No comments:

Post a Comment