Global Economy Deflating, US Headed For Recession, Stocks Falling
Janet Yellen’s press conference Wednesday confirmed that the money printing central bank has come to a halt, stocks spiked revered and headed due South
The global economy is deflating fast and the US is heading into recession, plus the Fed Chairwoman is blindfolded and not seeing the future damages. She and her gang of money printers that have been pandering to Barack Hussein Obama are going to get hammered by reality in Y 2016.
Ms. Yellen has insisted that the economic fundamentals are sound and said it again Wednesday. That, even though just about everything that matters is headed due South, including business investment, exports, retail sales, industrial production, inventory ratios, commodity prices, freight volumes and much more.
This Keynesian devotee hangs her optimism on the misleading and heavily tweaked to suit jobs numbers put out by the US Bureau of Labor Statistics.
One cannot keep saying that the US labor market is in good health when there are 102-M (until today I thought is was just 94.7-M) adult Americans without jobs. Or when there are still 3% fewer full-time, full-pay head of household jobs than there were 16 years ago when Bill Clinton was still in the White House.
At that press conference Ms. Yellen admitted that the Fed is out of excuses after 84 months of money printing and still no real economic growth. And that it will start draining up to $1-T per day from the Wall Street liquidity. We are seeing happen right before our eyes now.
If the Fed does not follow through on this huge draining action, interest rates will not go up, and the Fed’s credibility will be shattered.
But if it does start heavily draining liquidity, it will catalyze the current sell off in stocks in the massive $2.6-T high yield debt markets.
That then will remove the price support from under the stock market.
The Big Q: Why?
The Big A: The massive debt financed stock buybacks and M&A deals have inflated stocks into the Ozone.
Ms. Yellen also admitted the Fed is out of tools when she hesitated on a question about the business cycle being extended. She was also reminded of the fact that the Fed cannot slash interest rates in response to a recession, because it is still Zero+ bound.
The Key takeaways from her press conference Wednesday, clarification that the Fed has 3 ways to lose: as follows:
- The market will plunge sharply in the coming months if the Fed fails to raise interest rates as now promised
- If it drains liquidity as now proposed.
- If it is confronted with the recessionary forces and bursting bubbles that it absolutely does not see on the path ahead.
Stocks staged a relief rally after the Fed’s announcement, meaningless, as it was just the work of machines and fast money traders trying to force some buy orders above the 50 and 200-Day MA’s.
Both are right in the 2070 range where the S&P 500 stalled after her press conference ended.
The S&P 500 has been see sawing on the flat-line for a year since it 1st hit Wednesday’s closing price in December 2014.
The S&P 500 tried to rally 34X since QE ended in October 2014, it has faded each time, the buy-the-dips strategy is sell the dead cat bounce.
These flagging efforts by market speculators to levitate are welcome, as we can trade the swings.
After Friday’s action, do not see a real Santa Claus rally next week ahead Y 2016’s recession drives speculators out of the gaming house, they have lost their friend in the Fed.
Note: the stimulus from major central banks has been a Key reason for the rally seen in global markets over the past several years. Therefore, a negative market reaction to news of more stimulus could be indicative of a sentiment change as participants are not wondering whether global central banks have reached their limits.
Friday, Quad Witching Day, saw the US major market indexes finished sharply lower at: DJIA -367.25 at 17128.59, NAS Comp -79.47 at 4923.08, S&P 500-36.37 at 2005.52
Volume: Trade was heavy, as over 2-B/shares exchanged hands on the NYSE.
- NAS Comp +4.0% YTD
- S&P 500 -2.6% YTD
- DJIA -3.9% YTD
- Russell 2000 -6.8% YTD
|WBR Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (-0.19)||Bearish (-0.40)||Neutral (-0.12)||Neutral (-0.03)|
|WBR Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (-0.07)||Neutral (-0.20)||Bearish (-0.31)||Bullish (0.31)|
|WBR Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Neutral (-0.06)||Bearish (-0.49)||Neutral (0.06)||Bullish (0.25)|
|WBR Analysis for VXX:||Overall||Short||Intermediate||Long|
|Neutral (0.23)||Bullish (0.31)||Bullish (0.40)||Neutral (-0.01)|
Have a terrific weekend.
West Brook Radio