Wednesday, 13 November 2013

Reflecting upon moon madness

The US and World equity indexes are still on track to climb higher into spring 2014. What will be particularly interesting is how the market copes in its fifth year of the 'economic recovery' that the mainstream continue to believe is genuine.

*the following two charts are something I posted 3 weeks ago in a 'moon madness' post. They are to be treated with some serious bearish contempt..but, I hope, will again provoke a few thoughts.

sp'monthly - hyper-bullish'A

sp'monthly - hyper-bullish'B


Some weeks ago I threw the above two crazy charts onto the web. To my surprise, I actually received a few comments that were similarly open to such extreme upside.

I'm similarly remain open to the notion that maybe we'll put in a key multi-year high early next year, but really, how can that happen whilst the Fed - along with other central banks, look set to keep printing for at least another few years?

I simply find it hard to believe that we won't just keep on battling 'broadly higher'. Certainly, we're due a major down wave of 20%..and I'm guessing we will get one next year. Yet, if we're 1900/2100 next spring...knock off 20%..and that gives us a floor of 1600/1500s.

From there..why not another 50% higher across the following 12-18mths?


re: scenario'A - sp'2500 looks pretty reasonable by late 2015/early 2016. Such a move wouldn't require an acceleration of the recent multi-year gains.

re: scenario'B - sp'3500/4000. That of course would be the stuff of nightmares...arguably for the bulls too. Trying to find a 'fair' exit if the US markets were to go nuts.

Not possible? about...

Japan, monthly

Many will have already forgotten the ramp in the Nikkei.. 70% over 7 months. There is little reason - if QE continues in the US into 2015 (which seems VERY likely), that we might not see a similar blow-off top.

There are also the grand issues of world capital money flows, money velocity, and general economic growth (or lack of)..but I won't be going into those right now.

*ohh, and in terms of the Nikkei, I should note equity bulls should continue to seek a monthly close in the 16000s within the next few months. That will open the way to 18k..if not also 20k.

Looking ahead

There really isn't anything tomorrow of significance. The Bernanke speaks in the evening, but I don't think that will be of any importance.

*next sig' QE-pomo is not until Thursday.

I remain largely on the sidelines, with no intention to short the indexes (or long VIX) until late spring 2014. There remain some 'interesting' opportunities in the precious metals (short side only). I will certainly consider going long the indexes (or a few select stocks), if we hit the sp'1730s.

Goodnight from London