Free Money Trumps All….that is all…

Having computer problems today so posting will be limited…

an excerpt:

The government spent a year doing what they thought was right—stuffing the banks with easy money. The market rally and any economic stabilization and potential recovery were based on this financial engineering. Some would say the rescue was a necessity but in reality it was all built on economic kindness and cash. Needless to say, it was wildly successful with a market rally that roughly equals the biggest and fastest in history. But the very public attack on GS and Wall Street turns a friendly government into a hostile one. And if the markets have been built on the largess of the government then it makes sense that the era of market invincibility is over and the tone and tenor of the market must change.

Well, after a beautiful blow-off to the 13 month “engineered” rally, the markets look a lot more interesting–and confusing. When we go straight up like we have for 3 months straight, you can doubt the move, but at least its predictable.

Today, gold is breaking out, copper is on the verge of breaking down, Europe is on the verge of collapse (really) and the government has been the “givers of  pain and delight” (from the Star Trek episode “Spocks Brain”). The government made the market with kindness and cash and they have turned hostile.

This Goldman charge and the Senate hearings are a transparent way for the administration to push through Finance Reform. But its not working yet. If you want to know if the FED is political, wait for their comments later today. If they do anything to scare the market, you know Bernanke and the entire FED is a tool. I wouldn’t be a bit surprised if those “big guns” aren’t taken out and the SPX to quickly test 1150. After that body blow the doctors will tend to the boo-boo’s with some fresh cash.

If Wall Street is scared enough, they’ll buckle. Watch and see…

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…