Well, well, well. So we dribbed and drabbed to get back to the halfway mark of the ”Europe is Saved” rally. It took six weeks to give back about 100 SPX points. Then we lost another 25 points in a day and a half.

There is plenty of blame for the action and its the same shit that I’ve been ranting about for weeks, months, years. I certainly don’t need to list them, outline style. And after three consecutive years, there are no more winks and nods. Everyone finally admits the true state of the economy and how truly fucked the capital markets are. The latest rally has been fun, like the previous free money inspired moves, but time and price are running out.

I believe in “The System” and that that it will endure long after we’re gone. But it needs a hard reboot and that will certainly be painful. Maybe the G-8 will pony up another trillion or three. Perhaps we can invent another product or sector that can distract investors and traders. Or maybe not.

Bearish. That I hate the Construct of markets in today’s day and age. That is true.

But my target for the $SPX was the 1320 area, which has given back half of the “Euro Is Saved” rally. That meets my intermediate-term target.

Couple that with FaceBook and Option Expiration tomorrow and the extremes that are building with all the negatives out there (you know them all, well). It is time for a selective stabilization and bounce.

Don’t get me wrong, we remain “elevated” and the Central Bankers will pump more freshly digitized money into the system, but this 50% retracement and the Calendar (Memorial Day) spells a pause is in the offing. Enjoy!

Yeah, so. Isn’t it great to be an individual investor, reading the newspaper and watching TV for your information? You probably really believed that the economy was “percolating”, that housing has “bottomed” and that the world is a “better place”.

It’s all propaganda and bullshit. I mean, it’s all going to zero, right? Nope. But if you’ve bought the ”Economy is Great and Europe is Saved” rally since last year, you are probably a bit uncomfortable. After all, you bought assets that were “inflated” by the Central Bankers of the world.

But we all know that story. What’s amazing is that we’ve come to accept, even relish it.  

Listen, the market is drier and seemingly less liquid than at any time in the past twenty five years. There have been trillions in liquidity pumped but if there become an impetus to sell, there will be nobody home. And the volume (which no longer matters) is half of what it was in 2007.

Sure, there are extreme viewpoints of sentiment but there is no overly bullishness or bearishness reflected in the market action. We are in an intermediate term uptrend and a near term downtrend. And aside from a few huge moves in individual names, the market has settled into seemingly watching paint dry. Except for the dismemberment of the QE trade in materials. Does any of that mean anything to you?

I’ve targeted the SPX 1310-1320 area as first support last month and we are almost there. You don’t think this bounce is putting in a near-term bottom, do you?

So we now have a clear pattern of news-flow and how it relates to markets. That may mean it will no longer work, but here it is anyway:

Since the equity markets are a cesspool of inside information-flow, markets will drop in front of bad news and then rally on the actual release of that bad news. The same holds true for good news, but less so in this Central Bank Controlled marketplace. I know it sound obvious, but after this morning’s action, it should be reiterated.

Are you surprised by this mornings action after the JP Morgan news? Most were, but nothing surprises me any more. The Costanza market remains alive and well!

How many times to I have to say the same thing? I feel like Bill Murray in “Ground Hog Day”. What? The market is living the past two years over again and again? In a similar time in the calendar? You don’t say!

Again, a stimulus-filled Fourth Quarter posts decent economic strength and the Hoi-Polloi INSISTS that it will extrapolate and continue through the rest of the year. And it simply does not. But in each of the past three years there has been hundred of billions of dollars in “assistance” to the investment community and that money stays locked in the closed loop of liquid financial investments. That capital is used for the “Bernanke Bid” that stays under the market regardless of the news. We are currently in the countdown for the next round.

Now, once again, the markets are dealing with all kinds of really shitty news. Even earnings are disappointing. But the hope of Central Bankers to the rescue keeps the Bid rather firm. But don’t let that fool you as there is much damage under the surface. Add that to the legitimate fear of a failure of the finacial system in Europe, again.

The “Europe is Saved” rally started near SPX 1200. We peaked just above 1400. Testing 1300 makes perfect technical sense and it won’t be so bad. Of course it won’t be easy. Emotions must be flared. We must face all out destruction or complete Nirvana. The truth is somewhere in between.

You can understand WHY the markets are on the defensive. The possibility of a Euro-bank run is very real, as it was late last year before they found $1.3 trillion.

This week the fears are justified but EVERYONE KNOWS that Bernanke MUST come to the RESCUE of Europe during tomorrows PR-fest. If not, then expect SPX 1310 to be tested in short order. If Big Ben whips it out, then a test of 1400 is in the offing. But it’s all just a band aid.