Market’s Up?

So, the market is up a hundred points today. You think that is a good thing? 

You see, when the market is under Distribution after a long and healthy run, even one fueled by Cocaine and in an alternate universe,  leadership can suddenly change. Like over the past few days.

The previous leadership is sorely lagging and the previous laggards are leading. Plus, the now leading laggards are defensive in nature. And when the laggards lead, it’s late in the game.

In its own camouflaged way, and without too much fanfare in the major indices, the market is getting downright cautious. Not fearful enough to actually pull the money out, but rather just move it into something perceived as safer.

Enjoy the continued levitation while it lasts.

And about Apple, they sold an iPhone to roughly the equivalent of 10% of the population of the United States in the fourth quarter of 2011. Even if the iPhone 5 was made out of diamonds, that performance cannot be repeated because of all those existing iPhone 4s contracts. I know, the difference between a $500b or a $600b market cap is marginal, right? Apple parabolic buyers: Are you sorry yet?

“So, the tax deadline has come and gone and the market is still elevated. What gives? I thought you said that we would crash the next day?”

Wrong. I’ve postulated that this key date is where the market puts in an intermediate-term top.

My thesis is that the elevation up to tax day is partially caused by and for the benefit of the odd-lotters who fuel the mutual fund and individual investor complex. It doesn’t mean that the money suddenly “dries up”, especially with the spectre of unlimited stimulus from the Free Money Regime.

As you have already surely noticed, the equity market is becoming highly fragmented. Indices continue to hang around their recent highs but it is getting “confusing”. From a technical perspective that is a sign of Distribution.

Fundamentally, Europe is in the shitter again and Lagarde is here with hat in hand and the talk is dour. After Bernanke told members of Congress that we won’t Bail Out the Eurozone, I don’t see how she will get what she needs.

So let’s “hurry up and wait” is the mantra for the markets as they work through distribution before the next temper tantrum over QE3. And that Apple is all over the map means The Street considers it fairly valued for now.

For months I’ve been talking about “April 15th”. Then I realized that occurred on a Sunday. The point is that I have long expected the markets to peak on the deadline of 401k/IRA money that is due to be allocated to tax deferred accounts. ‘

My hard date of the 15th or the 16th is simply semantics. That day is today, the 17th.

One thing about money managers; they put money to work just as soon as they get it and today is no different. The pressure on market leadership is gone, poof. And after a quick 75 point fall over about a week, Apple is 30 points off today’s lows in just about an hour.

All feels back to normal, with everything that should be happening, is. Just remember that the rush of money ends with today’s deposits. That doesn’t mean that I expect a sell off to commence tomorrow. Just that the market is peaking right about now.

Trading stocks is one thing. There, you make a bet and it either works or it doesn’t. There is usually no time parameter nor requirement, unless you are a degenerate gambler speculating with options. Joking.

When forecasting stocks or the broad market, most will try to predict price but seldom time. Usually you get the innocuous “12 month target”. You seldom get specific and realistic time & price together in once forecast.

I’ve long had a April 16th target for the market to head down the other side of Heartbreak Hill (PQ Wall). I was off by a few days as the market has been under distribution for several weeks and the deterioration began in earnest at the beginning of the month. Last Thursday’s one way squeezefest was just that. And a smokescreen too. That the parabolic leadership has broken confirms it.

Sure, it is a long-overdue pullback and a broken clock is right once a day, etc. My thought of a double top–on a negative divergence–this or next week is still a possibility. But please don’t say you were not warned with a very specific time target in mind.

We’ll continue to worry about Europe and earnings and everything else and pray for more Free Money. And some will admire the Secret Service who have taken a vacation recommendation from Ben Bernanke. He’s been going to Cartegena for hookers and blow since 2008.

So, Fat Boy Evil flaunts his 20th Century missile technology and it fails miserably and very publicly. Talk about losing face. Watch out because all they have left is to attack the South or brainwash some political prisoners.

Speaking of brainwashing, we have a good deal of that going on right here at home. Just look at Thursday’s stock market action. It was a giant middle finger to whoever would bet against “America, Fuck Yeah!”

The most dovish of the FED HEADS, Dudley and Yellen, promised more pure, uncut morphine for the markets addicted needs. Even KashKarry told people that the market is on a “morphine drip”. Some spoke of that over two years ago. But the rest of the media said the one way gains yesterday were based on the hope that earnings would be strong and the Europe wouldn’t sink into the center of the earth. That is one hellofa reason for the best day of the year.

This COSTANZA market is reaching its natural endpoint as we approach our April 16 dateline. I don’t know exactly what day and what hour the wall will be breached, but it is coming any time. The lies and bullshit being fed to everyone and us sheep believing are reaching past a ridiculous point. And those who don’t believe “go along to get along”.

I’m not saying to make a stand yet because you could easily get run over. But it feels like the markets are balancing on the head of a pin and could fall off at any time. That means a realization that asset prices are just too high. By about 20% to start. And that means everything, including oil, precious metals, etc.

No, I’m not some permabear telling you to dig a foxhole. But the system is being pushed to the limit. As Scotty would say, “We canna take much more of this, Captain!”

Have a swell weekend!

For months I’ve been babbling about the stock market and Tax Day. The theory is that markets levitate based on individual investors contributing to their tax-deferred retirement accounts and that cash inflo moving into stocks and stock funds. It is the unwritten but widely understood rule that is the cause of the “sell in May and go away” phenomenon. After all, odd-lotters are notorious for buying the excitement (top) and selling the desperation (bottom) over and over again.

But things have changed a bit this time around. The individual investor is widely absent from the stock market in most every way except through his retirement accounts. Hence the decreasing average daily volume, now about half of what it was even last year. I could prattle on about Market Makers and High Frequency Trading but I’ll spare you.

Well, its almost April 16 and most of you have already contributed to your retirement account. And it just so happened that we have experienced our first little correction of the year, after another ridiculous straight up market based on expectations that the economy is getting better, backstopped by the Central Bankers Free Money Regime in Perpetuity.

Sixty SPX points in four days. That little correction comes after literally weeks of technical negative divergences in many of the major indices and under-performance by this Bull market’s leadership; materials. Who cares as long as Apple and Priceline remain in the spotlight as market leadership and places to hide. Plus, new concerns over Europe’s solvency and a pause in Federal Reserve stimulus have the stock market a teeny tiny bit worried.

But even in this market where a photo upload site gets bought for a billion dollars, there are plenty of things changing under our very noses. Not only have material stocks been falling but so have precious and non-precious metals. And it’s all masked by the out-performance of the technology sector. And it is all done on ridiculously low volume.

We’ve been doing about 750 million shares on the NYSE per day. Let me break it down: 150m shares run in the first half hour, 150m at the close and 450m run from 10am to 4pm. That means that 20% is run in the first half hour, 20% is run in the two minutes after the close and 40% are run during the remaining six hours. It is bizarre, yet even when there is high volume selling, it dries up the very next day as low volume buying returns.

Now is probably the time to get much more cautious. I believe that Bernanke’s mission in life is to “digitize new liquidity” but even he may have to take a pause for the time being. He is not done, not by a long-shot. He will have to print trillions more just to keep the economies head above water and he will most certainly do so. But just like last year and the year before, the perception of a improving economy and an elevated stock and oil market will dictate that the middle part of the year is a great time to get your buy list ready while you’re on vacation.