Evil Is As Evil Does

Happy Friday 13th everyone! As you can imagine this is a busy day for us down here in the lair and it goes without saying that we strictly adhere to our take-no-prisoners policy today. Everthing Everyone must go!

Since this is Evil Speculator I of course owe you something really devious – a chart that makes the hair in your neck stand up. Well, I have just the thing, so brace yourself:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,9,5,2]

Well, don’t say I didn’t warn you – this is really as devious as they come. Now seriously – the atrocious nature of Banana Ben’s money printing machine in the face of 40 Million Americans on food stamps is truly in a league of its own. But if you are a trader and expect a ‘return to normality’ once QE2 runs out in June – well, then you have another thing coming. As a matter of fact it’s just like when you think Freddy Krueger is finally dead and of course he’s not and now he returns to do you in slasher style.

Alright – you have no idea what I’m talking about, right? Unfortunately it seems your mental development is just not evil enough yet – stop resisting and embrace the power of the dark force!

Take another look at the chart. See, I did have a bit of an epiphany a few months back when I started to plot this thing. What suddenly jumped out at me (yeah, slasher style!!) is that it took a complete ‘draining of the swamp’ on the parts of the Fed for equities to really start feeling the pinch and to eventually take the express elevator to Woodshed Central. I have highlighted the ‘zero periods’ in yellow on the chart above to emphasize my point.

Now, let’s think this through. The termination of POMO cash injections will indubitably cause some of the plush teddies to throw some of their remaining pennies into some short positions. After all, no more QE means the market is going to tank, right? And I actually have little doubt that equities will experience a little reversal sometime this summer – but note that my emphasis is on little. Because there will be well over $100 Billion in Fed cash that still needs to drain itself out of the system and that will take a while – several weeks at minimum.

Thus, after the initial dip I expect Freddy Krueger to return with a vengeance – slashing and chopping the bears at his heart’s content. In other words – most likely we’ll see yet one more massive short squeeze that will induce an extra helping of terror and destruction into the grizzlie’s already dismal reality. After that happens – and only once we are scraping zilch on that chart above – only then may we see equities reverse for real. Once the bus is empty (or full of mutilated bodies). And that sinister outlook neatly ties into some of those long term sentiment charts that Volar shared with us yesterday.

Now, is that evil or what? 😉

Happy to have been of service.

Cheers,

Mole
[/amprotect]