The Bigger The Bull The Bigger The Fall And That's No Bull

March 14th, 2012
in Gary's blogging, Special Post

This morning the markets opened flat and have wandered around a bit with a positive slant. The DOW and the 500 are just about at yesterday's highs at 13182 and 1393 respectively.

Leavitt puts it nicely this morning.

@leavitt: "The Asian/Pacific markets closed mostly up. China dropped 2.6%; Indonesia, Japan, singapore and Taiwan rallied more than 1%. Europe is currently up across the board. Austria and Germany are up more than 1%. Futures here in the States point toward a flat open for the cash market.

The dollar is up. Oil and copper are down. Gold and silver are down more than 1%.

The Fed spoke yesterday, but the big news came from JP Morgan where they’ll be raising their dividend and doing a $12 billion buyback.

A steady uptrend was followed by about 6 weeks of consolidation and now we have continuation breakouts. The small caps are still lagging. I would consider it a yellow flag if the Russell can’t make it’s own new high, but I still wouldn’t take a position opposite this movement.

The market tends to reverse its post-Fed move the next day. Obviously yesterday was super bullish. If history holds, the market will give back some of those gains today. If a give-back happens, I fully expect it to be bought and new highs to be made again.

I was not in the same camp that believed the markets were going to rise dramatically as they did yesterday and that move took me by surprise I admit. What concerns me is, once again, the low volume we are witnessing and exactly what does it mean. (Read the article below by Market Blog ) I know that green volume tappers off as you near a top, but both the red and green volume is lower by some 30% YoY and yet we continue to melt up. This volume that accompanied the market spike yesterday that was only marginally above the last 4 sessions and actually lower than the March 1st session. (Which was eventually followed by a correction of sorts)

Can we go higher, yes if you believe the historical highs of the charts, but will we? That is a question, if I could answer, would make me a gazillionair overnight. I have so many questions about why we are here at these elevated market levels and are they real or manufactured by Chairman Banana and the 'Five-Fingered-Financiers' who work the night shift. One real red flag is the USD is up and so is the market. So what gives or is this a warning the market rise isn't going to hold?

This whole market stinks and the smell is getting worse by the day. All the politicians are desperately trying to put a good spin on the mess they got us into and it is beginning to look like plain and simple incompetency. The Fed and DaBoyz are exacerbating the situation with deeds of 'black magic' they are so good at and the prognosis doesn't look good.

I have proprietary indicators that have continually shown me over the past month that the rubber band is being twisted tighter and tighter. It now appears about as tight as you can get it and that concerns me from a stand point of holding anything overnight much less buying a long ETF for the day. Last Friday I jumped into a short and then, just as quickly, jumped out of FAZ when I realized the market could go higher, but never dreamed it would explode higher.

Keith has it right in his article when he says we are entering a no man's land.

Entering No Man's Land: The Trend Is Still Your Friend by Keith Springer

"We are now entering no man's land. That is the period just between earnings season where the market tends to drift lower. The market has had this tendency since the rally started, where stocks rise during earnings releases due to better than expected results, then correct as earnings expectations get reduced between quarters, only to rally again as earnings season starts again.

The only difference now is that stocks are well overdue for a correction so we will either not see the pullback people are expecting, or we will get a steeper correction than expected which will scare the bejesus out of investors into thinking it's the end of the world as we know it."


As mentioned above, something with Mr. Market just is not right and doesn't pass the smell test.

Bull Market? Investors Aren't So Sure by Market Blog

"For a raging bull market, things sure are quiet out there.

The Dow Jones industrial average notched its fifth straight gain on Tuesday, re-conquering the 13,000-point level and hitting its highest level since December, 2007. The tech-heavy Nasdaq composite index blasted above 3,000 and is now at its highest level since 2000.

These are impressive milestones, to be sure. But a striking number of investors are giving the good times a wide berth.

According to Bloomberg News, recent U.S. stock trading volume has fallen to its lowest level since at least 2008, suggesting there might be a lack of conviction among many investors."

Low trading volumes suggest that many investors have concluded that while there's no reason to flee the market, there's no reason to embrace it either. They believe the market's big gains are in the past, not the future."


You know if it walks like a duck . . . . . . If the bull trips now it is game over.

Market Top Seems To Be In by Kevin Flynn

"The reporters write their stories about investors being cheered by the strengthening economic data when what is really happening is trading money playing the momentum rally.

The challenge for investors remains the same: the markets are overbought and prices supported by agnostic money that has no commitment to anything but the momentum trend.

But after Tuesday's action, it's hard not to think that it was the top, at least for a few weeks. Traders like to say, worry about today's move today and let next week worry about next week, but the flip side of any bender is that the bigger it gets, the more painful the payback headache is afterwards. The jobs report isn't as good as it appeared, and neither is the economy here or around the globe.

In fact, through the first full week of March, there isn't much indication that this quarter is any different from the first quarter of 2011.

Yes, we know, every morning the trade has been that if the world hasn't ended, Apple is good for another five bucks at the open. And around 10:30 AM, some big guns will come in and start throwing around some money. But friends, these good folks aren't buying anything. They're renting. Keep that in mind.


"I think all but the true-believers in buy-and-hold investing have a gut feeling that there is a good chance of at least one more huge, terrifying bear market wipeout before the deleveraging era comes to an end."

Written by Gary

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