Quantitative Teasing

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Howdy, Slopers.

I woke up this morning – as I almost always do – at an obscenely early hour and staring at the ceiling, contemplating life and its purpose (I have a lot of time for such things). I actually fleshed out a fairly comprehensive view which was so completely dark, I felt it wasn't worth sharing. I guessed, though, that it was something akin to nihilism – a term I'd heard often but never explored – and, sure enough, my ruminations have already been well-defined here.

Existential nihilism seems closest to what I believe, although I would tack on one other thing: the only thing you can do to add "meaning" to life is to either reduce suffering or prevent suffering.

There are many who believe life's purpose is to glorify God. Good heavens, what a load of crap. The supreme being I contemplate isn't burdened with such pathetic insecurities. Others believe a life well-led will lead to immortality. Again, God in heaven, spare me from such a thing. Most people don't know what to do with a rainy Sunday afternoon; do these nit-wits really yearn for a never-ending existence? I think they got Grace mixed up with Hell.

Oh, wait. You wanted to try to figure out how to make money using charts or something. I forgot. Let me turn back to that.

It goes without saying that the annoying, nettlesome, cursed topic of QE3 is going to reach fever-pitch this week, as we crawl our way to Thursday's big event. I hope Bernanke DOES pull out his bazooka and get it over with, but I'll go out on a limb (again) and predict he does this: Dick. He has one bullet left, and he knows once it's shot, it's shot. If he launched more "accomodation", I think it would give the market one quick, final spurt and then send it spiraling down.

I think what'll happen instead is that he'll announce nothing, the market will briefly drop in "disappointment", and then – completely inexplicably – rally. That's sort of the worst of all worlds, since it'll prove once again that the THREAT of QE3 is more powerful than the DEPLOYMENT of it.

Just look at the chart below. QE1 is tinted yellow. Huge move. QE2 is in green. Medium-sized move. Operation Twist is in cyan. Smaller medium-sized move. OT Extension is in magenta. Smaller move still. The potency is declining. QE3 would be an even punier move and, possibly, perversely, could actually REVERSE the market. Then Ben would be fucked beyond imagination.


As for a target, it's tough to say, although the first line in the sand I'm watching is the wedge that's forming on the S&P. The price point is close.


I am very, very lightly committed to this "market" – a mere 28% in short positions, and the rest in cash. I won't be comfortable until Beard-face is done.

Oh. Have a nice day.