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SPDR S&P 500 ETF Message Board

  • pvigo123 pvigo123 Dec 8, 2011 11:37 AM Flag

    Why yesterday was the top for a while...

    Draghi explicitly said this morning at the ECB conference that there will be no accelerated bond buying, or lending to the IMF for bond buying. This was what the markets wanted out of the Europe announcement tomorrow. No one gives a shart about better fiscal coordination and penalties on budget offenders that won't be implemented for years, the market wants that because Draghi implied earlier this week that if the 'fiscal stuff' was approved, even if not implemented for a while, the ECB could do QE / buy bonds and bring down rates. By saying today that they won't do that, then tomorrow's announcement has no value, no matter what it is. And thus the markets are selling off hard, and will likely sell off harder tomorrow once the 'details' do not include bond buying.

    This backdrop, paired with the 3 days of getting rebuffed by the 200 DMA, the sell off could really accelerate to downside as there will be technical sellers pushing down at the same time that former Santa rally bulls are looking to sell as the Europe mega plan thesis falls flat yet again. Who will step in to buy the falling knife? I guess we'll find out. I think the answer is us, we'll be the buyers, wasn't the market has re-priced cheap enough for it to be worth it (<1150).

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    • I think the markets may well sell off fairly steadily from here until late January, until it becomes absolutely clear that Italy is going to default when there are no buyers for their $100 billion of bonds they are bring to market during the month. At that point the markets will be at new lows, with pundits predicting the end of the world, and at that point, the ECB will capitulate and start printing money and buying bonds to prevent an Italian default. Nothing ever gets done in Europe until the gun is literally to their head. So load up at the end of January at 'end of the world' equity prices, avoid the falling knife for now. Or at least scale in very very slowly, and don't start scaling until SPY is below 120 again. Starting February 2012, we could rally pretty strongly to new highs, but not until then. Reminds me of early 2009.

 
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