Loading ...The Tide has Turned and These Charts Predict the Next Stop
by Thad Beversdorf • August 2, 2015
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What we saw with the latest GDP reports is something truly remarkable. A market that was explicitly told the past 4 years of economic growth had been overstated simply shrugged off the news. That is, absolutely no price recalibration took place. This really evidences beyond any doubt that there is no relationship between the economy and the market. It further evidences the Fed’s increased proficiency in directly guiding the market.
Now I know this is not shocking to many of us. But to watch the market’s blatant irreverence toward a report that, with the flip of a switch, removed 12% of the presumed economic growth from the past 4 years did strike me as remarkable. It shows that the printing of economic indicators is nothing but theater. There is absolutely no rational market explanation that the market traded flat to up on the day when current GDP missed estimates and the past 4 years of growth was adjusted downward, all in the midst of one of the worst seasons for YoY deteriorating corporate revenues/earnings.
But more realistically what it suggests is the only player left in the market is the ‘buyer of last resort’, i.e. the Fed and its minion entities. Certainly nobody wants to aggressively short the market in the face of a clear long only strategy by the Fed, but just as certainly no major money managers are longing this market. Volume has simply dried up.