Markets Are In A Fog – Slow Down Or Soon Find Yourself Off The Cliff

April 3rd, 2012
in Gary's blogging, midday post

I believe the charts everyone is using to corroborate their positive views lately are severely skewed, at the least, suspect to their validity because of low volume for the past 3 months. Maybe longer, as market volume is down YoY some 30% and this makes ANY 'technical' prognostication nearly impossible.

The volume that is there is partially due to non-human influences of the algo machines which make up 70% of normal market trading. Low volume is just like fog making navigating seriously challenging when the charts are outdated and being constantly changed by those who can.

The present state of the markets have been unquestioningly manipulated by HFT's, DaBoyz and the 'Five-Fingered-Financiers' working the night shift. This is the stock market phenomena of today in which many investment pros are overlooking and shouldn't. You are NOT really seeing what is out there, especially if you watch the 'Main Stream Neurosis Broadcasting Company' (MSNBC).

Follow up:

The real issue here is that market participation of traders and the cash crowd has been abysmal as reflected by low volume. Making matters worse, anything propped up with flimsy or questionable data can come tumbling down a lot more easily than castle built on a strong foundation.

Maybe it is true we are really going to continue up, but the arguments are very thin and the boat has some serious leaks and we all know what happened to the Costa Concordia. Look, politicians and those taking care of your 401K's will ALWAYS tell you everything is O.K. in the market place and is actually going to get better; they have too, its their job by definition.

The politician will not get reelected if he tells the truth and will panic the shepole's. The same is true with those that rely on you blindly moving forward because panic will ensue and markets will pull-back. The problem with so many negatives 'floating' around it is impossible to tell if the politicians and fund managers are happy that the markets are really in good shape or not.

"The talking heads in the financial media aren’t very much concerned with your long term investing success. They only care about convincing you to stay in the market at all times and fixated to their analysis for the latest market movements."

Lots of interesting thinking going on in relationship of where the markets are headed and to me it is beginning to look like a top is just around the corner. But that is just one opinion.

One side of the big picture is that many financial “experts”, including yours truly, have been cautioning about a possible pull-back for weeks reasoning that such a robust rise in the markets can't be sustained for much longer.

The other side is that the health of the US Economy hasn't all that bad, but better than it has been and the European debt and solvency issues have been quiet too.

As of late there have been numerous articles on “Market Liquidity” as measuring generator for answers about the unknown and other sorcerers wand waving magic. If you are in, watch your back as a correction could happen quickly. If you are out, cash is king!


The "core holding stocks" held by Institutional Investors have broken out to the upside ... not just an upside breakout, but it is one that broke out above a 12 year down sloping resistance line. (See today's posted chart by clicking the link below.)

This is baffling to many investors who have been thinking that European debt problems would take the stock market down.

What has been behind the current up move? Injections of Liquidity ... and lots of it.

As we discussed in yesterday's update, Inflowing Liquidity levels are very high and have been in Expansion Territory since the beginning of January.

Also ... it is an election year where it is not unusual to see the money spigots open up more as each party tries to gain an edge for the upcoming elections.

Regarding Econintersect Investing there is another interesting article to read.

Liquidity Approaching Inflection Point” by Lee Adler.

The composite liquidity indicator was virtually flat last week on a mixed performance in its components. The indicator has recently accelerated upward away from its 39 week moving average. With demand for Treasuries slackening, the rise in liquidity has gone entirely to the benefit of the stock market and some commodities.

The longer term direction of the indicator composite suggests that the stock market should continue to have a bullish tilt, while Treasuries, which are over-owned and still long term overbought, may continue to get hammered intermittently. All of the liquidity flows could be focused on stocks and commodities while the Treasury market sees occasional selling. That can only go on for so long however. Bond market downturns in the past have led stock market turns by about 3 months.

Coming in neutral is Leavitt. Leavitt said earlier that the Fund managers missed the boat and were sitting on the sidelines having not jumped in during the last pull-back. Which is it; fund managers not participating or stealth buying?


When the week began I was thinking that with the employment numbers coming out Friday and earnings season kicking off next week we’d get a continuation of the range we’ve been in. If indeed this is going to happen, the bears need to step up and push prices down because they’re dangerously close to ramping up from here.

Overall things continue to look very good. If the market doesn’t move up, odds favor the range continuing because things will slow quickly – it usually happens into a long holiday weekend (the market is closed Friday). But if the indexes move up, it wouldn’t take much for them to get squeezed higher for a couple days.“


I have read over the past several weeks comments regarding the VIX and being at the lowest point in years. Again, I believe this is a physical process caused by a lack of participation of the cash crowd and option traders. Just remember, the market has a bad habit. It tends to punish investors whenever they grow too comfortable with it.


“The VIX is at its lowest levels in almost five years, as fear premium has been disappearing from options and VIX futures. Traders are left to determine whether the steep contango is the result of the market lulling itself into a false sense of security, as has historically been the case, or whether the abundance of VIX ETFs has skewed the curve.”


The US markets at 1:00 EST has the DOW down to 13207 and the 500 at 1412, The Russell 2000 currently is at 838 not moving all that much.

Gold is at 1674 sea-sawing all day, GLD is at 162.72, SLV is at 32.23, SSO is at 58.76, SPY is at 141.25. Brent is at 124.70, and WTI oil is at 104.54.

Written by Gary

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