The Beginning Of The Great Recession Part IIAugust 4 | Posted by Kevin Monaghan | Top Story
The markets have been patient with the political turmoil in Washington… until last week. The markets have now shifted their focus to the softer economic reports and are selling off on the worse than expected numbers. GDP numbers were horrible and the debt debate (/debacle) did nothing to instill confidence that Washington can get anything done. The media hasn’t helped, placing extra pressure on our debt situation and placing fear into the minds of investors.
Wall Street is now bearish and there is a stronger feeling that the markets will head lower. Earnings season, which in the past gave the markets a boost, wasn’t as spectacular as many people thought it would be and failed to push the markets higher.
Technicians point to a head and shoulder’s pattern in the S&P which now has some weight behind it. In addition, the 200 day moving average was broken. For the markets, it’s not looking good unless you’re short.
On a final note, the markets have learned an important lesson from the past two years. If they sell off aggressively, then they will get more stimuli. This will play right into the Fed Chairman’s, Ben Bernanke, playbook; more quantitative easing to avoid a great depression. The easiest way to send a message to Ben is to have the markets sell off.
Disclosure: Author, Kevin D. Monaghan, Senior Partner at Elite Investment Group is short SPY put spreads.