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December 14, 2005
Getting the hang of it yet?, Wed., Dec. 14, 2005, 8:29 AM
Yesterday a few minutes after the FOMC decision came out, and Wall Street was abuzz, and the broad equity markets were zooming, I was warning all traders not to get sucked in. Did you listen? Are you starting to get the hang of it yet?
For my article yesterday, I took a snapshot and wrote the accompanying words:
"There is nothing here to make the equity and bond markets zip higher as they have. This is nothing but cheerleading.
The higher Fed rate and the lower bond yields are actually flattening the yield curve, which means that recession is that much closer. The spread between the 2-year and 10-year U.S. Treasurys is only 10 basis points and it is flat between the 2-year and the 5-year. So when the long end comes down here and the short end rises, the near flat curve may even invert soon.
And you tell me how an inverted yield curve can lead to the picture below. But don't waste your time thinking about it because it cannot happen unless traders are being misled."
So, here is the rest of the story. If you listened to me, and not those CNBC talking heads, including Wall Street's leading "experts", then you were prepared to see a sell-off.
When you see a spike like this, which has little or no basic rationale, then you are being set up for a distribution of stock. Knowledgeable traders have used small volume plus a lot of media spin to ratchet up emotions and prices, only to turn around and distribute stocks, on large volume, to the unsuspecting public.
This is what the saying ‘lambs are being fleeced' means.
Really, are you starting to get the hang of it yet?
Posted by Posted by Bill Cara on December 14, 2005 08:27:14 AM | Category: Trader Tools