Credible Confusion

For those watching the gyrations of the S&P Futures, the sceptics are being vindicated. How long will the weakness last is unsure (though I have an idea), but; fear is seeping into the market. The strategy I’ve been following is written about obtusely here, here, and here. The list of red flags which have been raised over the last month is long, and taken individually the market might have easily overlook each. Yet even as the elephant in the room, Mr. Bernanke, tied the lose ends together as optimistically has his communication strategy would permit, traders started looking for an exit.

So that’s all well and good, but what now? The elephant has spoken.

I’m guessing, barring any new shocks, the markets just need a little time to digest rationalise the following contradictions: in this order…

  • Inflation/Deflation/Debt – The Fed, ECB and The BOJ – Free Money
  • Europe – Recession
  • Asia – QE ++
  • Gold – Crash in Paper, High Demand for Physical
  • The US Economy – Interest Rate Risk, The Positive Jobs Spin is in Part-Time employment.
  • War – Syria, Iran, Afghanistan, Iraq, etc.

As time passes and perma-bulls start spinning the pressure should ease, but at this point yesterday’s buyers are sitting on their hands.

Fed spin started in earnest today, the WSJ’s Helsenrath has piped in, “Overlooked ‘Dovish’ Signals In Bernanke Press Conference”. Even the ECB is leading/following the charge, according to Noyer, “Markets overreacted to US announcement”. We can look for more over the weekend.

Ignore the noise. Here’s a chart that I like.

S&P Futures