So, the crap rises to the top. It shows just how counter-intuitive the market has become. The “Royal Scam” of “saving the markets” has brought the most extreme kind of speculator to the fore–the ones who daytrade bankrupt companies because they are moving. This is a subset of almost every market boomlet. They all say, “it doesn’t matter what they do or earn, I’m trading it”. And then it works.
This phase is great for the day trader and we have an enviroment where risk has been eliminated for the moment. So make hay because you all know how this will end. I’m not saying to stop buying lottery tickets because they are fun and exciting. I’m just saying that the lottery ends and you’ll be left holding a worthless ticket. Nobody wants that, do they?
The continued “rumors” of deals and takeovers are helping fuel the fire. Remember back in 1988-1989, after the crash of 87? (I’m at least 47). There was a massive takeover-related boom that continued for a year–until the UAL deal fell apart and the market corrected–sending us into the recession that should have happened after the crash–but was forestalled by the Greenspan Easy Money policy ver 1.0.
There continue to be a million and one reasons for this market to give back at least half of what it made in the last ten weeks. In fact, reality points to a market that should do worse. Technically, fundamentally, and valuation-wise, the market is past the point of extremes to almost any historical comparison. 10500 will be tested, maybe just for a second or two. But it will be tested soon. I wish I could tell you the day–perhaps one day next week…
Obviously the FED is basking in the glory of complete market domination and control. Don’t expect them to reliquish it quickly or easily. The egos there rival the egos of those on TV. Maybe bigger because the numbers are much, much bigger. The latest is that they will be “allowing” markups in MBS paper. That may be why banks have rallied. And since they bought $1.25 trillion in MBS, it may have been the plan all along. Let banks mark-em up and so can Uncle Sam.
In the meantime, markets did a good slug of volume to the downside today. But the volume has dissapated and buy programs are again ruling the roost. Dips are still not allowed. But look at the encluded monthly chart of the SPX. Do you want to allocate much new money into a pattern that looks like this? Unless of course you think this says we are going back to test our highs. Anything is possible in the “engineered” marketplace. In the meantime we continue to hold our longs and look for low-risk ways to participate in order to play this levitated and extended market.