March 9th, 2012
in Gary's blogging
The dips are being bought as we watch the markets relentlessly melt up, but by whom? The market volume continues to be low and that is worrisome as to what exactly does it mean. There have been reports of “stealth” selling over the past several months betting on the continual melting up by DaBoyz and their algo machines (or so the theory goes).
As a trader I find it difficult to jump in risk free as we have been able to do in the past. Now a lot of risk has to be put on the table to squeeze out a profit, a meager one at that. Also knowing that the market is poised to turn on a dime has put a lot of us on the sidelines unwilling to see a financial disaster unfold before our very eyes. O.K. A little melodramatic, but you get the point.
The markets have slowed down their rise today and have traveled sideways for the past hour or so. Normally I would expect the markets to sell off some towards the end of the day, but with DaBoyz in the drivers seat, that might not happen. However, I won't be holding anything over the weekend.
Currently at noon the DOW is at 12951, the 500 at 1373, SSO at 55.62 and SPY at 137.76.
A Dash Of Insight – Jeff Miller (Read Entire Article here)
What does this mean for our trading and investing?
For investment accounts, I have been using the last two days as an opportunity to establish positions in favored names for new accounts and for enhanced yield while we can sell high volatility in calls.
For trading accounts it is reasonable to be more cautious. My experience is that you never miss much on employment Fridays. Even the strongest numbers get plenty of negative spin in the early going, that shorts can cover without much loss. You can count on Rick Santelli to check his email (as he did last month when the data seemed strong on all fronts) to learn what bloggers are saying about birth death adjustments, seasonal adjustments, labor force participation, or something similar. He will then explain why any progress can be characterized as completely bogus. These arguments might not prevail in the long run, but you only need a little time to get flat, and Rick has your back.
I make this observation not as a criticism, since everyone has a role and an audience. It is merely an observation about how this monthly drama plays out, told by someone who has watched it for many years. It used to be more dangerous to be short, but not so much in the age of the Internet.
If you agree with the thesis that the investing world is too bearish on the economy, there are many good leveraged plays for a rebound including CAT, CMI, and ATI [long all three.]
Personally, I see another correction on its way soon, very soon and with REAL volume. I see the 500 moving up to the 1377 area and backing off. Just how much is the question.
Written by Gary