By The Disciplined Trader
Mr Bernanke’s hot and cold water throwing antics have been a driving force in the markets of late. Fired up by the Fed chairman’s comments last night, the bulls have rallied the market in a show of support towards the continuation of an easy-money policy and the potential return ofthe risk-on trade.
But I have a question for Mr Bernanke, that is simply why do we need more stimulus when the massive amount injected over the last four years has failed to create a healthy economy? The bulls have short memories, they easily forgive and forget events from the past in return for a market rally and increasing portfolio, but complacency has been comforting the market and allowing a false sense of security to permeate for far too long. Something has to give eventually.
Bond yields are continuing to rise and this coupled with a weak economy can only be a recipe for eventual disaster. People will start to lose confidence in the empty promises from central banks and when they are able to see rationally the bear market will resume in earnest.
We are nearing an inflection point as the market is trapped and investors are cornered. If economic numbers improve fear of tapering arises, if the numbers get worse investors run for cover.
I’m waiting for the right level on FTSE 100 to go short, to confirm my trade and bearish thinking I’m also waiting for the e-Yield sentiment indicator, courtesy of e-Yield, to turn bearish. The RSI has already risen above 70 on the 2hour chart, a top is close at hand.
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