Can the Fed Support Asset Prices Forever? - Analyzing the Technical Indicators (w/ Milton Berg)

TL;DR

Technical analysis is being explored as a potential edge over fundamental analysis, with indicators suggesting a possible bear market rally rather than a new bull market. The Federal Reserve's actions and the psychology of investors contribute to the market's commodity-like behavior.

Transcript

i'm going to call you the turning master if you don't mind milton today well okay might as well but i'm not the greatest trading master anymore well this is a really difficult uh experience that we're going through in terms of dealing with turns because you know you and i i think we spoke maybe two weeks ago about some of the indicators uh that you... Read More

Key Insights

• 🦔 Technical analysis is gaining importance as investors seek an edge over traditional fundamental analysis.
• 😥 The recent market rally is questioned as indicators point to a possible bear market rally rather than a new bull market.
• ❓ The Federal Reserve's actions and the psychology of investors contribute to the market's commodity-like behavior.
• 🥳 Different indicators, such as the 10-day breadth thrust and the 12-day upside volume, offer conflicting signals, making it difficult to determine the market's direction.

Questions & Answers

Q: How did a meeting with technician Ned Davis change the perspective of the speaker, who had previously believed in rigorous security analysis?

The speaker initially had reservations about technical analysis, but after attending a meeting where Davis spoke about making market decisions based on sentiment, momentum, and monetary policy, the speaker was inspired to explore technical analysis and create their own proprietary technical indicators.

Q: Is it accurate to attribute daily market moves to daily news, as often mentioned in financial news?

According to the speaker, attributing daily market moves solely to daily news is oversimplified. Factors such as supply and demand, institutional shifts, and gradual moves by large investors make the relationship between market moves and daily news less straightforward. Technical analysis provides an alternative perspective on market movements.

Q: From a technical analysis perspective, does the recent market rally suggest a new bull market or a bear market rally?

The speaker is skeptical about the recent market rally. Although there have been numerous buy signals since the March lows, the market's behavior post-March is atypical. Worldwide markets have generally not reached new highs, indicating a bearish sentiment. The volume and speculative nature of the recent rally suggest a commodity-like behavior rather than a sustainable bull market.

Q: How do indicators such as the 10-day breadth thrust and the 12-day upside volume support the bullish case?

These indicators have historically been bullish signals, often followed by significant market gains. However, the timing of these signals in June, months after the market low, is unusual. The speaker attributes the recent bullishness to speculative sentiment and potential hyperinflation concerns, but remains skeptical given the current economic conditions.

Summary & Key Takeaways

• Technical analysis is gaining importance as an investment tool, particularly due to its ability to identify market sentiment, momentum, and monetary policy trends.

• The current market situation, post-March liquidity crisis, has raised questions about whether this is a new bull market or just a bear market rally.

• The Federal Reserve's role in stock market movements is debated, with evidence suggesting that fundamental factors and individual company performance are limited in explaining daily market moves.