The media cinched it…

We woke up to a Monday barrage of ALL the major media telling how great we are doing thanks to the gains in the stock market. Bloomberg, NYT, WSJ all got the memo…

The recent market action WAS the blow-off top to the 14 month trend that began in March 2009. It was as lopsided as any time in history.

There. I’ve said it.

They’ll be bounces and volatility. But the silly folks who say to just follow the trend have been given a wake up call…I highly doubt that this will have been a one-day wonder…

Now that every newspaper ran a bullish story yesterday and everyone “believes”, we can have a correction. Volume is increasing and there is little in the way of support but air to the SPX 1180 level. Of course, 1150 should be tested as well…that is nothing, but will suck the speculative premium out of the market.

The market has been so consistently up and there has been so much lopsided excess in the activity and sentiment that it has been a magnet to the “what me worry” crowd. My email box is filled with penny stock winners and investment newsletter advertisements (in addition to the usual Viagra and Russian Bride ads). After 115% run in the RUT, and into major resistance, you’ve got to be sensible…

We’ve come almost a month after MBS buying has ceased, and 2 weeks after 401k money has been allocated. There are plenty of stocks to buy, but just not the ones you’ve been buying…Long suffering shorts will get even fast.

Get ready for egregious drops, short covering and lots of new volatility. Buy the tests of the primary breakout in your  favorite stocks. And keep a clear head…

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The market obviously feels supremely bullish. Many stocks are moving 10% or more per day. Small cap and speculative issues are moving 30% a week. Again, obviously this makes the vast majority of market participants ecstatic.

This suggests a few things to me. First, we know the market’s sentiment is skewing bullishly. Readings are at or near extremes. Second, because there are no sellers and no shorters, the market is wildly off balance. The natural checks and balances of supply and demand are not working because there seems to be no supply. But how can that be?

We know there have been tremendous liquidations in the two crashes and everyone who had to sell did so. But there seems to just be trading-oriented buying. Don’t they sell? and isn’t any and all  positive news built into most stocks as most have returned to pre-crash levels?

We’ve been getting paid to be believers. We should believe in the capital markets, the economy and the government. We should believe that everything is back to normal and its off to the races.

Which brings me back to balance. There is none. The market is wildly skewed to the point of extremes. I want to say that any student of the market would be very uncomfortable with the relentlessness of it and the huge stock volatility. It feels good but it feels very, very dangerous as well.

There will be plenty who tell me to get a life and go with the flow. Respect the trend and listen to what the market is telling me. I’m listening and I’m beginning to hear the rambling of a complete lunatic.