Looking at the daily/SMA picture we get something a bit different.
The QQQQs are locked in tight with their SMAs with everything about even right now. In other words, traders are looking for a direction for the market to go.
With the SPYs and the IWMS notice:
-- The SMAs are all moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are right between the 10 and 20 SMAs
Also note that prices -- with the exception of a drop down 4 days ago -- have been in an incredibly tight range for about a week or so.
1 comment:
Hey Bonddad,
Great blog!
I do have a question for you.
. How do we know the financial crisis is not just a liquidy issue and not a solvency issue? If it is a liquidity issue then the programs the Fed has put in place this week along with a mandate to the primary dealers to acheive thier liquidity by accessing Fed funds rather than foreclosing on thier shadow banking system clients would indicate that we are basically through the financial crisis.
The credit markets may remain frozen for another few months as they figure out what the MBS are really going to be worth assuming that liquidity will return. but once that figure is better known writedowns will be made and the we will be beyond the problem.
Is it really a solvency issue which would imply that the MBS valuations are not coming back even if the credit markets free up? Is that a good assumption at this point? Has anybody crunched the numbers in order to determine the probable value of the MBS assuming some level of default and if so is the loss figures really enough to create solvency issues at the major banks?
If it is a solvency issue then we have a long way to go to get through this but if it is really more of a liquidity issue I think we may have seen the worst.
Any thoughts would be appreciated.
Post a Comment