Back To Work

posted Sep 2, 2014, 10:58 AM by Katie Shook

The summer doldrums are officially over.  The question is, will we finally start to see some increased volume and volatility in this market?

The current pricing pattern continues to be one of consolidation around the 2000 range.  Even though the market closed at another all-time high last Friday it failed to clear the intra-day high set earlier in the week.  So we’re basically still looking to see which side of the razor’s edge we fall on.  Does the market keep pushing higher or does is pull way back?

If I had to place odds, I’d still say a mini-pull-back is possible – but the fact the market held up well at 1900 was a good sign.  I’ve heard both sides of the argument.  Some say we’re going to go to the moon, others are calling for a pull-back to S&P500 below 600.  The catastrophes called for by some are likely over-blown.  It’s difficult to rationalize a pricing pattern with a 30-year time horizon or longer when so much about the industry has changed.  The development of HFT algo’s, near-zero-latency electronic trading, ubiquitous information access, and even central banking policies have all made it much more difficult to envision a world where the markets would erase 20 years of stock market gains in a matter of weeks.  The ‘to-the-moon’ dreamers are equally optimistic.  Predicting the price of the market 5 years from now — without understanding the inflationary characteristics of our economy — is cute but it’s not useful.  The markets could double, but if inflation does too, we’ve really just spun our wheels.

I’m not saying it’s not possible.  I’m merely saying that using technical data alone — without looking at the global macro picture — makes for a pretty big stretch.  The pattern that appears to be unfolding is one that is going to continue grinding higher.  And I expect to see bigger gyrations over the next couple of months as the traders get back to work after a pretty slow and steady climb of a summer.

Daily Digits

Daily Digits 9-2-14

Weekly Estimated Range

Weeklies 9-2-14

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