My last post was exactly one month ago and I’ll admit I’ve been slacking. As you know cats are lazy by nature.
My previous post titled Thrilling Throwbacks of the Past was about the monthly timeframe and what I was seeing on the chart at the time – so waiting a month to post an update makes sense in a way.
I’m sure you’ll take a moment to review the previous post after reading this but here is the gist of it. At the time the SPX was sitting at 1865 and the most of the necktie-wearing market pundits were bearish.
Now you can’t blame them because as I’ve pointed out many times, it’s human nature to be bearish near the lows – after a big sell-off.
The day I posted the following chart on February 12th, the market was 1-day off of the “catnipulation low” and most of the guys I saw on TV were expecting the market to break down further.
Here were my thoughts:
Now it’s not easy being a contrarian cat but human nature does not concern me. I tend to rely more on instincts and when I spot catnipulation on the chart and conventional wisdom is overly skewed in one direction, I try to think outside the litter box.
So here’s where we are now and the prophesy has been fulfilled. The SPX has “thrown-back” to the underside of the 10-month / 20-month moving average cross.
Now take a moment to think back to a month ago. Think back to SPX 1865 and try to remember who else was suggesting a bounce of this magnitude. I’m sure there were some.
But as I recall, guys on TV wearing neckties were suggesting to “fade any rally” and saying things like “this resolves to the downside” and calling for everything from a collapse to a break down into the 1700’s. Even head technicians at supposedly reputable establishments were scared. One guy even said to move your 401k to cash!
Doom was in the air and the fear was palpable.
On the exact date of my ‘contrarian call’ even BofA succumbed to ‘human nature’ and slashed their year-end S&P price target.
Perhaps they should hire some cats that rely more on instinct than silly human emotions.
Regardless of all that, per the title of this post, we have arrived.
So what happens next?
Well, I am going to ponder that this weekend as I gaze at the charts and gather my thoughts.
But I have to be honest – it’s impossible to know at this time.
That is because this coming Wednesday is the “all-important” Fed decision and the market is pricing in a zero chance of a rate hike. I only saw one guy on TV last week suggesting they might actually raise rates this time around. He went out on a limb.
Although many have suggested a “data dependent” Fed has no excuse to hold off at this time, I’m certain the excuses they come up with will be quite entertaining and good for a few laughs.
In the back of my mind I can’t help but think the market has come too far too fast and that Fed Day might actually mark a turning point in the market. But that’s just a conspiracy theory in the back of my subconscious right now.
Like I said, I need to gaze into the charts and gather my thoughts more. But quite honestly, we are staring into the face of a binary event and there’s no way to tell how the market reacts. We saw the madness surrounding the ECB meeting and I expect more of the same this week.
In this environment it almost makes sense to do the opposite of what makes sense.
While many market pundits wearing neckties think “we’re out of the woods” and it’s “safe to get back in the market” now that the SPX has run up 212 points in 21 trading sessions, my tail is bushed up and I’m getting a little nervous.
Let’s see where we land this coming Friday.