Broken Robots? (Market Wrap Up 04/06)

A major theme of The Fly’s postings lately has been of the absurd nature of the stock market of the past several months.  Even to the non ZH tin foil hat crowd, the end of the day speed buying and after hours action in the futures that we have seen so much of is a little alarming. I have been saying for months that bull markets climb a wall of worry, so perhaps this is all part of the game.  I would be remiss, however, if I did not mention that saying we are climbing a wall of worry is not my way of whistling past the graveyard.  Rather, I am keenly aware of the monetary and fiscal problems facing our county.  Frankly, the fact that we have oil prices above $85 a barrel, combined with historically very high unemployment and a federal government interfering with the private sector in a way we have never seen before, should be enough to short stocks indiscriminately in and of themselves.  Despite all of the above, however, my money will continue to be bet based on price action and volume primarily. To sit here and regularly argue with the market would be nothing more than a good way, as usual, to lose a lot of money.

MARKET SUMMARY

The $SPX inched up 0.17% to closed at 1189, as the slow drift up continues.  As I have noted before, the crash of 2008 left a “vacuum” where we are basically inching higher without much volume.  I expect that this phenomenon will continue until around the 1225 level. The chart BELOW should illustrate my point.

Recall that the most of amount of longs before the crash were trapped in late summer of 2008, when investors mistakenly believed that the Fannie/Freddie bailout was THE bottom.  When we finally get back to that 1225-1250 level, I expect the supply that hits the market from those longs–who have finally been made whole–to be a formidable adversary for the bulls.  At that point, I believe the bulls will need more convincing volume than we are seeing now to break above those levels.  Until then, the drift up inside the vacuum continues.

INDIVIDUAL TRADES

As noted in this tab and in The PPT today, I took profits in $CROX and $PRGN because I thought those charts looked a little too slow for my taste. I would rather redeploy that capital in names with more momentum right now.  I also made a quick intraday scalp in $GGC and bought some $AIG for a long swing trade. I still have around a 20% cash position and will look for the best setups.  My top picks as of now are $ETFC and $ZAGG, both of which I am long.

Back for more charts later.

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