A New Dawn Approaches
A funny thing has happened in the last 6-8 weeks. There are almost no sellers. Literally. The market has made a massive push and it really struggles to sell or stay down. It seems almost funny how bad it is to try to short for more than maybe 20 minutes at a time. Obviously you cannot fight the market – its doing what it wants how it wants. But it sure makes trading hard – the buy and hold guys have it locked down.
One thing I know is that no matter what these guys do that are chasing and then bidding the market so it does not sell – it will sell eventually. The only way you actualy make money is to sell or lock in profits. Until then its just a fantasy. At some point they will tip the tide to the point where a majority are actually fearful of losing gains and then the selling is real.
A favorite pattern lately has been to break down below a support (or even key support) and then out of nowhere a massive burst of buying comes in to rescue the market. It happens so often I now expect it to happen. Often this can result in a new daily low (the break) , only to see a new daily high 30 minutes later as the buyers relentlessly chase the market (im sure shorts are in there too, trapped like dogs).
Even in the height of the bull market, we would repeatedly have 10-15+% corrections in the market that would last a month or so. And this was when everything was just perfect (or everyone thought so). So I am not sure what is going on now. Several theories are in play that I think about:
- Shorts are completely or mostly out of the market. The SEC messing with the short rules before caused a panic, and now there are many proposals again in regard to uptick rule and shorting. Rather than get caught, they are staying away from day trading and longer term positioning.
- Manipulation factor on high. There is a group of large banks or funds that are pushing the market higher at the Fed’s and Treasuries request to try to turn the economy out of the recession by making it appear as if the stock market has it figured out. The way the rescues happen like clockwork, the ramps into the close every friday, and other very odd trading behavior gives this some credence imo. Would be easy for the government to just give these guys money to push the market up.
- Traders all gone, algo’s take over. This one can happen as well – computers have taken over more of the futures trading which drives the market. Since there is no real force to fight them and they are all doing the same thing it just keeps going. This one I like too because the actual variance of price during the rally pushes is actually uncharacteristically low most of the time. I have seen the dow futures push up 100 pts in 20 minutes with maybe an 8-9 point max retrace the whole time. Sure this happens – but not this often as it does now.
Whether any of these are true, or a combination, I have no idea and we may never. All I know is the trading action is very odd and I expect at least half if not more of this gain to be gone when this is done. Note – I am not predicting a top, I am saying that when this is done, these idiots will undo this much faster than it actually ran up as everyone heads for the exits. We could hit 9k, 10k etc. I really dont think 10k is possible, with GM dust, C is dust and a few others they just dont have the fuel for the DJIA to actually push up that high in the short term.
