SWAN SONG…$320 BILLION IS A LOT OF BEANS…

Someone sent me an email outlining the thoughts of a notable technician. The primary thought was “it doesn’t matter”. Over and over again and to every negative indicator or objection the phrase “it doesn’t matter” was uttered.

We live and function in a marketplace whose structure has dramatically changed. It is NOT different this time but MANY of the old rules do not apply to our current environment. Yet many strategists and prognosticators continue to try and explain our market strength in old fashioned terms, through interest rates, commodity prices and corporate earnings.

Just today I read an article promising that the tremendous gains in commodity prices are builtstrictly on demand issues and the expectation of a powerful economic recovery. We are asked to beleive that this widely held perception is fact.

Let me cut to the chase. The equity and commodity markets have now discounted a powerful recovery in the actual economy. They have discounted the creation of millions of jobs, a firm recovery in real estate and an Apple chipset in every home (you know how I feel about AAPL). Don’t forget the continuation of ZIRP, QE and POMO for the foreseeable future.

Commodities will soon face position limits for speculative buyers. Sure, there will be loopholes. But we are NOW at prices that squash consumption. Some would have you believe that higher prices stimulate consumption, but that is just another lie promulgated in order to get you to believe.

Stock prices have levitated to record highs in the most volatile sectors, namely small-cap and speculative issues. It is amazing to watch the fun and festivities of a tiny stock rising hundreds of percent in a matter of days or hours. But anyone who has seen this in the past knows how it ends. And only a smattering will exit in time and stay out or short. No, the vast majority will be scorched.

This December/January rally fits with my prediction that 2011 will look very similar to 2010 for market performance. But now others have seized on this conclusion, so it may need review. But the length and breadth of this rally now has me not just raising the stops on our remaining positions, but actually selling as well. Some will say that I’m a bull in a bear’s clothing or vice versa. I am no such thing. I am a market realist. A may miss some opportunity, but there is another one just around the corner.

A very smart commenter on this blog said to the effect that “they’d never let the market drop before AAPL’s earnings”. That makes more sense than almost anything I’ve read about our marketplace. The “just buy the dip” complacency is as high as I have ever witnessed. Stock performance is as positive as I have ever seen. As Le Fly says, “it is the easiest tape in history”. I’ve been cautious not to chase things and impatiently holding my longs. My call is that today is just another beartrap. We will then spike one more time, to new post-crash highs. Then get ready for an extended period of consolidation and some real opportunity to short selected issues.  My antenna are up, bigtime.

Those bastards at the CFTC want to impose position limits on commodities! How dare they tell us all knowing investors what to do!

Look, if we want to hoard commodities, treat them like equity investments and never sell them, then it is our business. It doesn’t matter if it take supply out of the market, gas from your car, food from your mouth. We’ve got the money, damn it, and we can do whatever we please! Plus, the new ETF products are exempt from regulation, right?

Look, 10% down to buy a commodity is still too onerous for a readily liquid and functioning market. I say, since your are limiting my investment universe, then let me put 5% down instead of 10%. 95% leverage is no problem. Give and take I always say…And don’t worry about us. We are buying some cheap semi capital equipment stocks today. What? They are 100% higher than where they were in August? Who cares? So are most commodities! Haven’t you ever heard of momentum? How about “The trend is your friend”?

Could gold be making a top after a decade? No way Jose, especially considering all the money printing that is happening. How about just a good old fashioned, honest-to-goodness 10% pullback? After that it will all depend on how many “QE’s” will be done in the future…

We have all been kidnapped and have been held hostage. It’s only been for about four months but it seems like a lifetime–especially during the last month. We have all been conditioned, brainwashed and converted into believing what the market is telling us.

In the march to the magical holidaytime, the twice-baked economic numbers seemed fabulous. Like a rebirth. But today we are seeing that it was all just another lie. The numbers didn’t get better, they got worse.

To add insult to injury, prices of food and fuel are at multi-year record highs. They want you to believe it is supply and demand but that is another lie, just like the rise in oil to $145 in 2008. That march higher for oil is the template for the run in all commodities today.

We continue to march towards 2008 in every market as we know the Fed has another $100 billion for us through early February. The economic numbers don’t matter. Valuation doesn’t matter. Traders just want to catch the next 20% mover and the public doesn’t care how we get there. They will only care when the market goes down.

I am long 16 stocks in the CreateCoin portfolio with 15 of 16 highly profitable, up between 10-100%. But I so want to bet against the falsehood that is the market. The market that has us brainwashed to believe that nothing matters except the largest and most egregious government subsidy ever conceived.

Market indicator after indicator are falling to hitherto never seen levels and it is due to the rail-thinness of the market. There is nobody left trading. It is just a few Primary Dealers putting their ZIRP money to work. We wait and watch the buy programs run and then we follow, buying any manner of equity. We watch the prices and we believe. These past few days SHOULD have seen a significant correction take hold. But instead it has been another buy the dip moment. These last days are sealing the conditioning and the training to buy the dip no matter what.

This  fabulous record-setting rally is currently in its 20th week. Being flat or up for 19 of the 20 weeks, it is the longest rally since our bottom in March 2009. I fear that it is the final phase of this almost 2 year old recovery-NOT just the beginning of something greater.

I know that you will tell me that its different this time because the economy and the markets are being “managed”. That seems true. But even with a new and vastly different market structure, I must remind myself that it is not different this time.

ADDENDUM: This phase ends with the push and a spike to Dow 12k in time for Valentines Day.

If I expect the DOW to go to 12k and the SPX to get to 1300 by next Friday’s option expiration (earliest) or by the first week in February (latest), does that mean I’m now ready to throw caution to the wind?

No.

Even though it seems as if the market is “to the moon, Alice”, only a few things have hit the lunar surface. When my little KLIC is up 30% already this year, I get both excited and a little nervous.

Interestingly, including today, the DOW is up just 300 points or 2.5% from the peak set during the first week in November. The SPX is up more, about 50 points or 4%. The Nasdaq has been where all the gains are, up almost 250 points or almost 10%. Of those gains, $100b worth is AAPL.

Aside from the more speculative and beta-producing Nasdaq, the gains have only been “marginal”. That means “not as much as you think”.

But today is a breakout in the world of technicians. If there is no selling, then you must buy. Asia is rescuing Europe today. What is their motive? It doesn’t matter as long as stocks are going up. The bullish sentiment is so stretched that it has come full circle, especially with GS expecting the SPX to hit 1500 next year. That either means they are liquidating everything now–or we will reach their target is a month or two.

Dr. Fly has it right. Put away your brains, knowledge and logic and just believe. Until everyone tries to get out the door at the same time that is…Then you’ll be stuck along with the newly converted.

The best strategy for investors is to try and hold through this risky and overextended market. Pick your spots to take profits and don’t look back. Traders should just hit and run but be ready to go “the other way”. Realize that nobody is “going the other way” any more so it is only a matter of a short time until it will pay to do so, bigtime.

ADDENDUM: My run for the gold is “tounge in cheek”. We could easily get to 12k. But it is all the more reason to run from the lies. Yesterday and today are seminal days that will be viewed as the cusp of an  important turning point…