Not a market of stocks…

First, congrats to Mr. Le Fly. After getting beat up on the VXX, it may be the biggest win of the year for everyone involved. 50% quick. In a messed-up ETN. Super-duper.

Let me say that much of this panic correction has been rather predictable even stripping out Europe and the loss of liquidity.

It should now be obvious that “investors” no longer invest. They “borrow” cheap currency from other countries and buy other “stuff”, whether it is oil or copper or stocks. The ease of “borrowing” determines the “investment”.

It has all become a game between countries and currencies. Between Central Bankers and Primary Dealers. All racing to beat each other to some mysterious finish line. Then the extremes are all reversed and the race is the other way.

This is obviously not really a stock market or a market of stocks. Sure, some company news can bring about movement, but its as we mentioned in the past; all in or all out. All long or all short.

How can this be regulated? I’ll tell you; it can’t. Policy makers don’t know enough to win and Central Bankers need the game to go on at any cost. At any cost…

We are now near the flash-crash zone. Defensive stocks are being hit–though not nearly as hard as the speculative darlings. In this market, Apple Inc. [[aapl]] will be the key stock to watch. Because it is everyone’s fav, you’ll know when the direction changes by watching its action. I don’t recommend to buy it, but in this market, it is your tell…

ADDENDUM: the lesson? don’t always believe what the market is telling you–even if it is screaming it in your face for months…It is a great lier…

Yes, I am yelling…Not at you but rather at our law-makers

Sure Europe is in dire straights. But Socialist Europe has been the slowest grower for the past ten years. Sure, their banks are insolvent, just like ours. But who better to “extend and pretend”? They will do exactly what we instruct them to do.  Sure, its a recipie for disaster sometime in the future and yes, we are Japan. But everyone knows this, right?

If your worried about the Euro, remember how great our markets did with a weak dollar. But the markets are not under pressure because of Europe IMHO. Markets will remain under pressure only as long as “Financial Reform” is debated in Washington. It is all part of my little thesis of the “War on Wall Street”…But don’t worry about the banks. They will find a way to do almost anything they want regardless of whatever new rules are passed.

Maybe Mr. Le Fly is right and there will be a giant puke and that will be the “moment” to buy. But maybe it is time to accumulate right about now. Buy a one-third position with a stop marginally lower than the flash-crash lows. But stay alert…

They say time heals all wounds. But there are always scars.

We have endured a historic market phase. Giant crashes. Massive rallies. Histrionic fear and greed. Perma-bulls and perma-bears. Both eternal optimists and pessimists have been “right” at some point in time.

Perhaps I’m being old fashioned–or it’s wishful thinking–but the great swings must end if the wounds can be allowed to heal, especially considering the massive fundamental and technical damage that has been wrought on our economy and markets.

The flash-crash is shining a Kleig light on HFT and its dominance on the overall capital markets. After the founder of a HFT shop told an audience that he “had not lost money one day in four years”, the glory days are now over. They snuck up on the market and took it over. Now they must lay low or be slaughtered by the long arm of the government.

Things will move fast, but just not in as extended a fashion as before. Perhaps we can now establish a trading range and allow the healing to begin. SPX 1080-1180. DOW 10250-10750. Nasdaq 2200-2400. Any major breach on volume means a breakout or breakdown.

Both are positive and one is kinda running away…