E Pattern Analysis Is Dismissed

Pattern analysis is dismissed primarily by pundits who missed the unfolding of the entire 2015 distribution year, and on-top of that the forecast ‘brick-wall of resistance’ at tail-end 2015 as trades would settle in the new tax year. On top of it most ignored the logic of a push from (month-end and perhaps new month) a necessary ‘Pension Rebalancing’ that we thought primarily responsible for most of the most recent upside, anticipated to attack the low-to-mid S&P 1900’s. 

Now, we indicated the other day that the early February action would extend at least for a bit the S&P move; and it did, perhaps helped by a spin about ‘Stan Fischer’s remarks on a Bloomberg interview that I listened to in-entirety. As the Vice Chairman spoke, there was a clear reference to not knowing what the Fed will do next, and the optimists jumped all over that one. What they missed and I noted, was a response to a question about the bloated balance sheet (too large and unwieldy he inferred) and total debt level he concurred is unsustainable. In fact he referenced that as a reason why the Fed needs to normalize policy. 

So I won’t delve into the Vice Chairman’s remarks deeply here, but basically he is saying data-dependency exists; but we can’t risk expanding overall Debt as it is an issue. Also; he challenged the inappropriateness of foreign countries use of ‘currency swings’ based on rate changes. To wit; he said it’s reasonable for a monetary policy to be used to stabilize the economy, but not to move currency. 

That seemed to be a slap-down to Japan and China; both of who are doing it in a way that’s perceived intended to weaken their currencies; enhancing ‘export’ competition, not adjusting inflation/deflation in their countries. Another way that we might interpret that is a defense of US Fed policy which obviously is being applied without the intention of improving our global competitive stance or even defending it. 

All this means is something for bulls & bears alike in his remarks; which from a policy perspective reinforced San Francisco Fed President William’s remarks in a Friday presentation, where he too defended the ongoing Fed stance. This, as well as the S&P seemingly defying the decline in Oil, suggest a detachment of the S&P and Energy; which some pundits or analysts quickly jumped on as well on Monday. We think there’s no detachment; it’s just the swansong of the move as gets everyone agitated so they try to come up with an explanation.