Thursday, June 11, 2009

Mini Bull Trap - 200 Day Exponential MA Holds Again

For the first time that I can remember in quite a while... bulls got a little charcoal on their nose. (I have no idea what that means, something to do with coal in their stocking) The 200 day exponential moving average continues to be a ceiling for day #9. I attempted to embrace the bull case with some index longs mid afternoon as we broke back over S&P 954 but I just sensed this could be a trap (please no applause, I have been sensing traps for 6 straight weeks to no avail - that brings my spidey sense success rate up to about 4% the past 2 months), and backed out when we fell back to S&P 951.

But never fear, S&P futures will surely be bid up 5 points between 7 AM and 9:20 AM tomorrow... because that one "urgent buyer" doesn't care about what price he pays, and just cannot wait to buy stocks at 9:31 AM. ;)

Just going off my own experience I can assume every institution who wants to short now covers by 3 PM anticipating "urgent buyer" showing up to spike the futures in that last 30 minutes, so there are very few people left to squeeze by this point since we've all been 'trained' to run like scared children at that part of the day. And everyone and their mother has realized that once the 200 day moving average was cleared that all the people who had been left behind would finally throw in the towel and chase this market higher with their loads of cash. That was the theory at least. It can still come true tomorrow or next week - as long as the squiggly lines say buy, everyone appears willing to suspend reality and buy. I see European indexes are now at the highest valuation since 2004... that's ok, keep buying. Valuation is for the birds.

I do want to point out some consumer discretionary names, especially of the restaurant kind are beginning to negatively diverge. Higher gasoline prices, the loss of the house ATM (past two weeks), not having jobs... eventually matter. I assume this however mostly has to do with gas - wait, gas was the reason consumer spending was up this past month signaling the recovering consumer! (oh, I'm so confused) ;)

Housing is starting to get iffy....

But hey we still have the 2 tenets of any healthy economy... smartphones and oil. Cars? Not so much - smartphones.. we're good.

Other than that, it is only a tiny victory for the bears... the market was still up for the day; but we remain inside our triangle with a false start intraday. As always the close is what matters and tomorrow is another day to grind up bear entrails. The 20 day moving average quickly approaches the 200 day... within 20-25 points of each other now. Fireworks soon ahead one way or the other.

Random Note of the day: Some of my online friends who have accounts with other brokerages say there were no SPY (S&P 500) shares to short at either Fidelity or Schwab for much of the day. So either (a) every small time retailer investor and smaller institution in America (who use Schwab) is shorting this market and hence the most liquid instrument in the world cannot be found to borrow or (b) grassy knolls.

Most likely just a random coincidence...mmmm. Kool Aid.

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