Thursday, August 20, 2009

Still in Our 40 Point S&P Range

We still remain in our 40 point "box" between S&P 980 and 1020. Thus far bulls have complete control... S&P 980 which was the "easy" trade short has been taken care [Easy Short Trade Has been Made] of and now we're being walked back up. Dip buyer have been rewarded almost without fail for half a year, and continue to be. I continue to call this action in between white noise area as most of the real money is off in the Hamptons.

As we think like a microchip it's really quite simple - HAL9000 will pile in over S&P 1020, and pile out below S&P 980. Any human with an intermediate strategy should follow. In between those 2 orange lines are for more short term oriented players. For now we continue an army like "clear and hold" strategy - that is reach a new level, some tiny pullback, build a base - and then attack the next higher level.

Good news, bad news it is almost all bought. Just in the past 5 sessions alone we've had bad retail numbers, bad consumer confidence (last week), worst than expected housing and unemployment (this week), a sharp drop in China - but the market is being supported (read that how you may) and it is what it is until proven otherwise. Combined with the fact almost every trader is now fearful of being short past 3:30 PM and you have a very self reinforcing circle. It will be interesting to see what finally breaks the pattern... and when.

Taking a step back to think what the US market and the economy has become... what do you call it when you have a vehicle and you take in money from one end, spend it, and when people want to take money out, you hand them money from newer investors - all the while spending the previous investors money?

Then tell me how that is different than how the US economy now is working... and by fiat the stock market, which is basically being subsidized by all these incentive plans, backstops, and bailouts. I'm sure the forefathers would be proud...

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