Expect the Expected?

Submitted by Scott on June 15, 2012 - 10:56am

I’ve often said that “Free Money Trumps All”, and so far during this extended Credit Crisis, it has.

Even Jim Cramer has taken my infamous “Pavlovian Response” commentary and applied it. Where have I heard that before? PAVLOV1 PAVLOV2 PAVLOV3 That’s always nice to see.

Interestingly that now, as the domestic and world economy are on the brink of finally shrinking and banks insolvency is inescapable, there are plans and hopes for a new and massive intervention. This hope has been responsible for the markets miraculous recovery from the weak employment report of two weeks ago and has somewhat changed the tone and tenor of the “just buy the dip” market participant (HFT).

But now EVERYONE JUST KNOWS that regardless of the fundamental situation, the markets MUST RALLY during Policy Response. Everyone, including the most bearish are resigned to that expectation. A full 100% of market participant believe it. So guess what? Expect a massive, sell the news response shortly after the suckers have committed.

Maybe I’m wrong but I think we’re hitting the wall with a giant splat. And on that note, enjoy your weekend!