Monday, January 4, 2010

Here We Go Again

Here is a chart released by Zero Hedge in December –

Red Line – Performance while the US Stock Markets are open
Blue Line – Performance while the US Stock Markets are closed

What the chart illustrates is that the majority of the returns since March 2009 have been achieved while the markets are closed.

Because that is when liquidity is lightest, so it takes less money to drive prices higher – if that is your goal (er, policy).

Here is a chart of the S&P 500 ETF (SPY). Look at how Volume has plunged, while prices have gone vertical. That is not the stuff of strength. That is the stuff of when the party stops, prices go vertically downward…

The Game
1. Crash the Dollar
2. Use “Analyst” Upgrades to pop key stocks or sectors above obvious stop loss levels for large Short positions, causing a “Short Squeeze”
3. Buy SPX Futures Contracts while the US Market is asleep

We got the trifecta today!

The Dollar got punked.

Futures were bought hard pre-Market.

Analyst upgrades on Financials like Morgan Stanley, with Financials sitting right below the 50-day, upgrades to Intel as it sits at the top of a trading range, when you know that a move above $20.60 triggers a mountain of Stop Buy orders, ditto for Cisco, Gaming Stocks like LVS and WYNN get upgraded and gap up or ramp up hard through their 50-days, triggering short squeezes…

If you are trying to figure out how it is that things keep going up while Companies are issuing stock and inflows into Equity Mutual Funds are flat to down the last 6 months, then you are not alone. Clearly, the buying is being done at night by the computers. Guys like Greenspan have admitted the need to use rising stock prices as a policy tool.

Put two and two together and enjoy it while it last. Today’s breakouts were probably meaningful (I bought several of them) and a good sign until the SPX 1,230 – 1,250 zone is reached. If we get there, then we will have to reevaluate holdings and strategies.

Watch the Foregin Market Breakouts

International markets have taken a powder since mid-October. Today they seemed to have awoken again. I see lots of breakouts from trading ranges today – Russia (RSX), South Korea (EWY), Canada (EWC), Emerging Markets (EEM), Commodities (DBC). I have been waiting a long time for these trading ranges to break.

These are all potentially starting to work as the Euro (FXE) is testing its 200-day (Purple Line), after a 38% pullback in December.

The New York Stock Exchange ($NYA) also broke out today. If these breakouts hold, then we probably get another leg up and test the 61.8% retracement level of the last Bear Market at 1,230.