Momentum Is Dead

• Posted by DynamicHedge
• on December 15th, 2011

One day the world looks like it can breathe a sigh of relief and next day, like a bad horror movie, the macro monster emerges from the swamp yet again.  I’m sure I’m not alone in in my feeling of utter headline fatigue.  It’s like the news flow is literally trying to beat traders down.  My feeling at the end of last week that there was a decent chance we would get a well deserved break from the macro news flow, was just that; a feeling.  There’s a big difference between what you feel and where your analysis takes you.  When it came to the actual mecahnics of running through the historical data, our patterns indicated a very bearish scenario developed on Monday morning. We had no read on Tuesday, given that it was the FOMC meeting announcement (and Bernanke’s birthday).  Wednesday’s lower open telegraphed another bearish day.  My point is this, all you can do lately to avoid the guillotine is take things one day at a time and one pattern at a time.  Until further notice, momentum is dead due to the overhang in sentiment and global debt.

Below is a sneak peak at one scenario I’m tracking for tomorrow.  Note: this is only in play if we open flat.  Any big gap is a completely different ballgame.

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