Zak Mir’s weekend musings – The 21st Century Fed’s “Sting” & Asset Managers

There are many things that beggar belief in the 21^st century, including what our collective ideas of morality (clue – we have none), values (X Factor contestants!), our betters (X Factor judges!) and money (load of printing of it via QE) are. Indeed, it is ironic that after the great asset bubble of 2003 – 2007 where so many people became “rich” that it became the Government’s problem not to the allow them to get “poor” by printing money. But for me, the last straw has come from yesterday’s announcement by the Fed saying that it will slow down / halt the “QE4EVA”. This is after we were previously told in the autumn that the bond buying would go on and on and on… until up to 2015 or when U.S. unemployment fell to 6.5% (whichever soonest). Of course, what was not said at the time is that all this reassurance was simply a back stop in case the U.S. fell off the fiscal cliff. And so, just two days after it did not, we receive the news that QE is to be wound down. If ever there was a deception, this was it.

Luckily, we in the financial markets are made of sterner stuff and know better than to merely listen to what were are told. It would appear that the stock market was already committed to the idea that 2013 will, finally, be the year of the bond bubble bursting as inflation rears it long forgotten ugly head and stocks surge higher. It could be said that we may need just one more week to find out whether the gap up for the likes of the FTSE 100 on the first trading session of the year was a false move or not. But we should remember from a charting perspective that the battle was already won by the bulls with the sharp May support line break and so a bear trap down to 5,605 in November just after the U.S. election. This would have stopped out even the most ardent bulls and of course at the same time convinced the bears that their time had finally come given the way the U.S. was set to fall off its fiscal cliff.  Indeed, it is now the case that the top of the May channel on the daily chart is pointing to 6,300, and as of today, in the wake of the non-farm payrolls, this does not appear to be a difficult end of January target to achieve. But of course, it could be a bull trap… Alas, nothing is easy in charting!

On to an end of week stock, and it really is worth taking note of the performance of fund managers at the moment, with even ailing hedge fund manager Man Group (EMG) – an SBM Top 3 Pick for 2013 –  seeing its share price back up above its 200 day moving average. However, I am going to shy away from that company (despite the bid hopes) and focus on what should be a more straightforward situation, Jupiter Fund Management (JUP). Here,there has been a steady rally quite despite the CEO having gone to the same school as myself, the dreaded Harrow School. The technical situation now is that we have an unfilled gap to the upside to start the year on an overbought stock. Nevertheless, any weakness towards the December peak at 295p can be regarded as a buying opportunity, with only sustained price action back below the floor of a rising July trend channel at 280p. The reward would be the price channel top of 355p on a 4-6 week timeframe.