Stocks-Rider

The Enigma of "Ben"evolence

Rating: 3.00 not yet rated(3 votes)    Vote:

You are logged in as | Logout

The fed cuts are still days away (no..that wasn't a freudian slip). But you should have listened to Ben today in the first part of his speech. It seemed like he wouldn't even wait for December 11th! The guy reminds me of a lean, mean hunter on a prowl. In a tip of a hat to his colleague's speech from yesterday, Ben confirmed the credit situation is deteriorating and almost trying to whisper in your ears - "we will do whatever it takes and oh yeah (pointing at a slippery rat called rate with a ginsu knife)..that too!". He seemed to be overflowing with emotions. Okay okay his face that looks mega botoxed didn't give much away. But what did you think? We are talking about a guy whose expressions are flatter than a flitter! Anyways, he later contained the "help we are all screwed!" emotion by adding that the fed will be looking at the new data that will be released before 12/11. Really, Mr Ben? Please explain to me if that was so, why would you stick your neck so far out with the whole doom and gloom portrayal. You could have just said "a lot depends - and I mean a lot, you crazy econ perves! - on the labor report and PCE report before we can truly say what we need to do in short term". Instead Mr Ben chose to paint a very grim picture of the economy first as if almost to get his excuse / alibi ready in case of a shock and awe on 12/11. We live in such exciting times! Anyways, the words that stood out most were "alert", "turmoil", "reversal from September" and "flexible". And no I am not really taking them out of context. The words were the context! So the bottom line to me was the gist of the speech didn't just translate into a single rate cut but - surprise! - it sounded like more cuts than what the fed fund futures are predicting right now. This means Ben wants to give us a shock and awe which sounds increasingly characteristic of the new fed. 25 points is not shock and awe. Think 50..heck think 75! Yes you know what I am talking about.

Okay so how are you gonna play this? I will tell you how I am playing it.

First nothing is guaranteed. So it is important that I remain agile and make some solid picks after a lot of research with a slight bias towards the conclusions made in this post. This is what I am trying to follow. I also explained some basic tenets of this strategy in my prior post.

If you put the essence of the above speech in combination with the generally bullish move in the markets since the last three days, you would feel there are a few more solid uptrend days fairly soon. My overall sense has also turned slightly bullish albeit for a short time. While I can't predict the intermediate term direction, I do feel that 1475 in S&P seems to be the key level. I will be carefully watching that level and based on which way we turn, adjust my trades accordingly. I am planning to keep my short hedge bets (TWM) intact but reduce the position size to half. Bottom line - even after all the bullish events with my own bias towards a short term upside, unless we go farther away from 1475 regardless of the direction, we cannot be too complacent about the direction of the market. So be careful out there. you never know when and where is the next sharp turn. And Mr Market doesn't even put a sign on the road.

Krish Rathi