Get ready for a decline
After Tuesday's rally, expect a big raid no matter the news. That's probably the safest way to play it ahead of the Fed.
How in heck can you tighten or taper when copper's just getting pounded and steel prices can't hold up? How can we think about tapering when Airgas (ARG), which has its fingers in every single pie says non-residential construction is very weak and Terex (TEX) agrees? How do you start tightening when Europe's still in flux and China seems to be going down fast?
How do we base the end of QE3 on homebuilding when we didn't get good homebuilding numbers Tuesday?
What's so strong out there besides the heftily-manipulated price of oil? Or do we just decide that enough is enough, job done? Or is there something else at work I heard today which is, "Hey, it isn't creating any jobs at all. So what's the point?"
I think that's nonsense. Whatever jobs that can be found are either tied to the wealth effect from housing and stocks or to the energy revolution. The latter Bernanke has no control over, but the former he could drastically trim if he's not careful.
All that said, I think the issue's gotten out of control. If Bernanke does nothing, interest rates go higher. If he says he is going to start tapering, rates go higher. That's Because people believe that rates wouldn't have gone up already if things weren't better. People just seem to think it is time to normalize the curve.
What is the scenario where rates do nothing? Permanent QE3? That's not going to happen. I can't think of one where the 10-year goes back under 2%. Can you?
So, was Tuesday's rally based on the idea that shorts fear what he will say, but when he says it they will just blast out of their longs and go short? I think Tuesday was all short-covering, literally, by people who feared one more article or one bit of input that said the Fed needs to do more, not less, to help stimulate the economy. I don't believe there was all that much real buying, because who gets long ahead of a meeting where the most obvious outcomes are not so hot?
We've had a lot of rallies like this before Fed meetings and it usually means you will get a big raid on whatever news there is. When it does go down in advance, you can have a post-announcement rally.
That's why I say get in shape for a decline. That's probably the safest way to play it ahead of Wednesday's big meeting on the heels of a spectacular day. And if it goes up, just let it run into the bell, as that's the big bad event theory playing out once again.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in the stocks mentioned.
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There's no breadth and no volume, no fundamental support or structure for this run-up, which is why everything and everyone will be hanging on Bernanke's every syllable. Beware the house made of cardboard, built on sand, next to a river, at the base of a snow-covered mountain.
"Instead give $100,000 each month to 850,000 lucky tax payers. Trust me, if you give 850,000 people $100,000 EACH month THAT will stimulate the economy. The banks are not."
It absolutely would work, Billy. Easier to monitor and manage, too. Of those 100,000 people blessed with instant cash and told to use it in a year or lose it, at least 70% would blow it stupidly (helps the economy), another 25% would purchase failure with it and the remaining 5% would and could go after business platforms competitively and succeed. In less than a year we'd have a whole lot of inroads helping oligarchies implode so we get those jobs and opportunities flowing again.
Recent tea leaves all point to some tapering. Fed has to say "last call" sometime, and today's announcement will most likely usher in the idea of 80 billion versus 85 billion per month injection into the economy very soon, if not this meeting. Naysayers will say "inflation" is low, but this is not really true... the "inflation" has been built into the price of equities that have risen too far, too fast during (at best) a middling to mediocre recovery. The money had to go somewhere, but even the Fed cannot let prices of equities go on like this forever. That would truly be a disaster waiting to happen....
I can't think of one where the 10-year goes back under 2%. Can you?
Unemployment goes back over 8% and Israel launches an air attack on Iran while the US experiences deflation due to lower energy prices and high unemployment.
It's called the world of fiat Keynesian economics based on cheap credit, fake money printed out of thin air, massive debt and useless consumption. Once you truly understand that, everything else is crystal clear. It's not quantum physics. Just plain ole common sense, Jim. But do you know what the paradox of common sense is? It's not that common.
(Likely) Text of Bernanke's Speech: "While the economy continues to make improvement, the Federal Reserve will continue to use all the tools at its disposal to keep what appears to us to be a fragile economic environment. It will, however, closely monitor both the rate of inflation, job growth and the financial markets for signs requiring a reconsideration of at least some of its overall policy and strategy at a future date. Thank you very much for coming. Help yourself to some heavy appetizers, and a cold beverage if you like.
Lay money on it....
We know Ireland is on for the Moochers, but I'm hearing now maybe Papa Doc and Mrs Doc got the message a family reunion in the mother land of Africa for $100 million may be a trifle too outrageous ?
Relax ................ The Stock Market is all Obama has to crow about ....... Baaaarack... Baaarack !
He won't let Bernnie stop the flow.
stock up out of the shoot by 138 points.....
"After Tuesday's rally, expect a big raid no matter the news."
i guess you failed the ESP tests?
Most folks will ask the FED to get out of the way but many of the same folks would be asking them back if things really go haywire. You can't trust Today's Capitalism and you can't trust the Government. Society is boxed in and doesn't have what it takes ensure the Money Changers don't take us down with them.
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