First Reddy Report EVER. I will use this as a place to share my thoughts and occasionally link to charts and outside material. The report is free and represents my ideas alone and should not be considered financial advice.
Everything got crushed today on an outsized selloff. The market was in a perfect place to short and it was sold with pleasure today. But was it justified? Sentiment is bearish. Support for the ES_F is 1308 then 1300. But what then? Will we careen into the abyss of a Dr. Doom style bear market? Here are some thoughts for the reversion trader or counter-trend minded folk out there now that being bullish is uncool again.
1. The EUR/USD pair is above 1.4353 at the time of writing. That's above the short covering breakout at 1.42 and with weak U.S. data overwhelming little Greece and it's S&P downgrade today, this pair showed no signs of an imminent collapse. Bullish.
2. Dollar Futures are below 75 even after the sell-off today and debt ceiling debacle in the House. Keep in mind the recent low is 72.86. With volume clearly on the side of longs the dollar bulls won't give up the goose that easily despite the fall from the pivot highs around 76.5 ish. Deflation expectations are the cause for the rise given recent data. However, it is my belief that the Fed will never allow for extended bouts of deflation when given the choice of moderate inflation or recession. The Bernank has shown time and time again he is on the side of Wall Street. So what's the fair value for the Dollar? How about right here? The fed can keep pumping in whatever form because the economy is so bad the risk of inflation is low. U.S. corporations are very profitable with the dollar here. The dollar for those who don't know is flat since 2008 when Obama came to office. Yea don't believe everything you hear.
3. What's up with the Republicans claiming America want's austerity and deficit reduction? Nobody over 65 or under 30 wants their "benefits" reduced. Will we become Greece one day? Yes, but only because our growth as a nation sputters to a halt. Not because we are spending too much. Should we spend less while we wait for growth to resume? Nope, sorry it doesn't work that way. If you cut off the social welfare for the the elderly and the poor majority then you cut off whatever growth artificial as it may be to somewhere around 1%. That ensures 10 years of pain. The Republicans are the party of pain. I have faith that the spineless Republicans will balk on any serious reductions in spending till maybe 2022 or so. Even then nothing will happen until after the election. Try getting elected after voting to cut government medicare to the elderly. Yea real smart Ryan. He will find out the hard way that people want cuts as long as it's the other guy who loses out.
4. Debt ceiling should get done sometime this month which leaves plenty of time for the market to churn. More of the same unfortunately. The S&P has done a lot of dancing but ended up in the same place it was in February of this year. So much for the third year of this bull market ripping higher right?
5. I can't think of any high beta sectors that are worth owning for more than a trade. Energy trade is over. Commods are in decline. Tech can't hold any strength (love the $NFLX though). Health care is dull. Financials are death traps. There is nothing worth owning really. It's all junk. The problem is what else to buy? Real Estate? Fuck no. Bonds? Not for people who wan't outsized returns.
6. Is it time to get short? Sure for a trade. You just might get caught by some Europe/China/Fed/Congress news that changes everything again. Today was a good example of a market that tanked trying to discount austerity and deflation that may never take place. Who knows what it will discount tomorrow.
GLTA
Chait Kamireddy
