Killer Action but Rather Predictable…

Forget about the news for a second. I know it’s difficult considering we are “melting the fuck down” fundamentally both here and abroad. In fact, this has been the worst year of newsflow that I have seen since Jimmy Carter was President when folks were waiting on line for gasoline.

The equity market, as flawed as it may be, is simply stuck in a trading range but clearly undergoing distribution after a 30 month Free Money rally that added $4 Trillion of liabilities to the FED and our country’s balance sheet. Jeez, there I go talking about fundamentals again! Gotta stop that.

Back to technicals. Like last year, we are stuck in a trading range. But unlike last year we are near the high-end rather than than the low-end. That is because EVERYONE JUST KNOWS that QEIII is just around the corner. How can it not be after all that has already been invested?

But today, like Friday, the SPX 200 day moving average is being tested and we have been above it since September 13, 2010 just a few days after QE2 was leaked. The 200 day is the “Demarcation line” between being “officially” bullish or bearish. Considering that there has already been an internal breadth thrust lower for the major market indices, it should be of little surprise that most stocks are way off their highs–other than the dozen or so momentum favorites that everyone must own.

I’ve thought that there was a chance that that markets could make a marginal new high before doing what the market must. Considering that equity indices swing so wildly and stock traders have more “hope” than other investors, it is still a possibility. But my long-standing target is for the $SPX is to give half of QE2 back–and that puts us to the 1225 area.

Fragmented, wild, frustrating, insane. Just a few words to describe the hour to hour market action. Remember, the stock market did not crash until AFTER the government promised $700 billion for Wall Street and it was all “Sell the News”.