Buyers finally get the upper hand!?

Greetings again from Tokyo as we were warned about typhoon season…and typhoon season we have received. We are writing this Wednesay 3 pm Tokyo time. Having a blast here and now Mets 6 up with a rousing comeback with 24 to go.

Looks like there was a lot of conference calls over the weekend between central banks in order to get the house in order. Central banks know they cannot have a big bear market so they will do everything in their power to keep things afloat and asset prices going higher. Remember, what’s another $15-20 trillion of printed money when you have already printed that amount? And don’t get us started on China and what they are still calling a market. I know markets. Markets are a friend of mine. China, that is no market! But that’s the noise. The real story is market action and that’s all we care about.

Our best guess recently was that the lows of 8/24 would not be taken out any time soon as we felt a massive washout occurred that day. But the aftermath of that day has been nothing short of wild both up and down with gaps to the upside and downside. Last week’s almost 600 point Dow drop was also less than thrilling. But after the nauseating drop, a nauseating back and forth and last week’s poor action, we think Tuesday’s action is significant and believe it confirms our thoughts that the 8/24 will hold for now and think buyers may finally have the upper hand. We did not believe they had the upper hand on the 1000 point bounce on 8/26-8/27 nor the 600 point rally on 9/2-9/3 but Tuesday’s action felt different.

To be clear, after the wild action we have seen, anything is possible. It is very tough to gauge such moves but we are comfortable for now in our thoughts. Keep in mind, while we think we can have more of a recovery, in order to really get things going, leadership will need to show up. There is not much. There are a few airline names, auto parts retail, cruise lines, better action in housing and housing-related but not much more. We will let you know if more show up. We suspect more upside is in the offing but after that, massive resistance that markets broke down from will be next.