Weekend Update

The potential for counter-intuitive moves in both the market and economy is very high with the advent of QE forever. .. This is a situation where waiting to see how the trends adjust is especially prudent.  The desire to predict is a natural tendency but it is usually better to let the market tell us what it wants to do and this is especially true now.  I can see bullish and bearish scenarios for almost every asset class with one exception…I find it hard to see a significantly bearish scenario for Gold.

That said, I think the highest likelihood move here is a fairly sideways market in US equities  until 1) the next earnings season 2) a fundamental breakdown of can-kicking in Europe or 3) a major geopolitical event (likely negative) although a reduction in Iran-related tensions (an unexpected positive) would likely knock 20 dollars or so off of oil prices.

It is good to remember here that the base case for markets in the absence of fundamental news is a slow steady grind higher since the most active market players, be they man or machine will have a trend- following bias and the trend is up, so that is the other back-drop.

…However, the margin of safety here will now get dramatically lower without a dramatic improvement in fundamentals (i.e. earning streams) and it is hard to see where that could come from outside of the housing-related space in the US, and that is likely to be fairly narrow in impact…This will set up more CMG/PCLN-like implosions somewhere down the road, so start planning to capitalize now, especially since the one area currently in a non-stop risk-on uptrend is the momentum favorites such as those two..

Charts of the week…take a look at the long-term charts of ONN and OFF…When these first appeared, I dismissed them as yet another short-term trading vehicle with a lot of potential for counter-productive results…I was wrong.  The eerily perfect wave pattern (so  far) makes them an interesting vehicle for trend-following and it will be interesting to see if the wave pattern continues once the risk-on trend reverses.

--------------------------------------------------------------------------------------------------------------------

Eclectic Wealth is intended to educate and entertain, however the information contained, while beleived to be accurate is not gauranteeed and Eclectic Wealth is not responsible for any investment decisions of any kind. The Philosopher King may hold postions in referenced securities.