We’re gearing up for a marvelous lesson in public relations later this month when the Fed holds its last meeting under the gavel of outgoing Ben Bernanke. That will happen January 29 & 30th. And, although the press won’t be in the room, a ceremonial “handing over the gavel” may be anticipated.
According to some, a rather obscure indicator of markets will flip over right in that period: The Bradley Siderograph. You can find a good discussion of it here, but the main thing to note (if you’re not actively trading markets) is that the Bradley turn date happens at the same time the Fed meeting pops up. This arrival of a Fed meeting and a turn date is – as the Chinese might say – an auspicious occasion.
Which is why it would be a dandy time for one of two things to happen: Either Janet Yellen will play ball with Wall St. or she will act tough. She’s stepping into a pressure-cooker where there is no right answer.
The analogy my consigliere uses goes something like this: The Fed thinks it can “build a bridge” across the long wave economic abyss that we’re almost smack over. In order to do this, they have built a series of bubbles to help them along their way. Print money fast enough to keep things going, but not so fast as to hand the easy win to us gold bugs through rampant inflation. You know, just keep depression/deflation out of sight.
One of these is seen in how the market went into a real estate bubble orchestrated by Alan Greenspan. That bought us part way over the chasm. Then, with the collapse of the market in 2008 into 2009, there was a need for a new stimulus to “build the next part of the bridge” and we have been going through that exercise with Ben Bernanke’s quantitative easings.
We note, in passing, that the Greenspan reign at the Fed lasted to 2006. With this in mind, we wonder if the “passing over” to Bernanke in this period, marked the end of the housing bubble? In many markets, 2006 (starts) were the last big batch. The top was in by 2007/2008 and then we know what happened next.
Analytics could be used to count days from the Greenspan departure to the bottom of the secular market in 2009. We know, for example, that the last Fed meeting for Greenspan was 1/31/2006. And that the Dow, on a weekly closing basis was setting its low on 3/2/2009.
That’s 1,126 days.
We can then plug in the date of Bernanke’s last Fed meeting and wonder what will happen 1,126 days later?
Will a new market low be appearing the week around March 1, 2017? Fed bosses don’t change at the bottom. But near tops? Yes, that would be more in line with expectations.
Markets on Ice
Still, for this morning it is “Turnaround Tuesday” and after slipping 45-points by the Dow yesterday, the market seems set this morning to come back to life with the futures pointing to a modest gain of 60-70 points.
The reason to be a little cautious in here is simple. I mean besides the Bradley/Fed date coming. The price of oil is still under $95, the December auto and truck sales disappointed, and the recovery needs something a little stronger than just newly minted paper to become sustainable. Another indicator – the Baltic Dry Index – has failed to move decisively higher than the 2,000 levels, so it will be worth keeping an eye on once we get to the turn date.
And that leaves us with only one major data point going into this morning’s open: The new Balance of Trade number just out from Census:
The Nation’s international trade deficit in goods and services decreased to $34.3 billion in November from $39.3 billion in October (revised), as exports increased and imports decreased.
GOODS AND SERVICES
Exports increased to $194.9 billion in November from $193.1 billion in October (revised). Goods were $137.1 billion in November, up from $135.6 billion in October. Services were $57.8 billion in November, up from $57.5 billion in October.
Imports decreased to $229.1 billion in November from $232.5 billion in October (revised). Goods were $191.0 billion in November, down from $194.4 billion in October. Services were $38.1 billion in November, up from $38.0 billion in October.
For goods, the deficit was $53.9 billion in November, down from $58.8 billion in October (revised).