So, the market knows every truth and every falsehood. It cannot tell the difference between what is real and what is imaginary nor does it care to. Truth and reality mean nothing. Everyone left in the market is conditioned to ignore everything except the free money. Free money will trump all until the free money ends.
Look at the action from March 2009 to April 2010. Free money was the water for imaginary “green shoots” that promised a better economy, more jobs and a better housing market. We know that green shoots was simply as much a figment of Larry Kudlow’s imagination as was the Goldilocks economy.
Look at the market action between April 15, 2010 and September 1st when the first whispers of QEII became a reality. As thin as the markets are, as flat to down as the economic backdrop is, as problematic as banks and housing are, it does not matter. Nobody want to be caught short like many were last year thanks to free money and when there wasn’t even a 1% pullback in 8 months. Now, the need to inflate and the promise of more free money has many commodities up 50% in 2 months. It has many stocks up huge and has created monster momentum in the institutional favorites. Performance trumps price 9 out of 10 times.
Our strategy in the summer months was to accumulate during the weakness. I was called a perma-bull and told that I am ignorant to the ways of the market. We have had a monster rally and those hecklers have disappeared. Now, my strategy is to use the current market strength to lighten up, raise my stops or to take profits outright. The old hecklers are replaced by new ones. They tell me that I am a perma-bear, am “just noise” and that I am ignorant to the ways of the market. I expect as much. It’s almost enough to make me stop blogging.
In the meantime, the market “should” pull back to test the primary breakout, first at SPX 1150 then 1130. It feels as if the market has settled in and is waiting for the official announcement from the FED. Then we will find out if “buy the rumor, sell the fact” is still a strategy that works. I believe it will be.
I will be posting the usual large number of charts over the weekend for our premium service as well as a full review of the market indices and commodities. Join now if you’d like a look. Have a safe and happy weekend…