Tuesday, January 11, 2011

Gliding Along the 13 Day Moving Average - Deja Vu

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The SPY futures rally between 6 AM and 7 AM is back.  Today we added a nice solid 4 points (thru 7:08 AM) or a good 0.30% in that 70 or so minutes, on no news at all other than it's premarket, why not buy?  Really there is no reason to open the market during normal hours with all the positive action we get almost every premarket.  Just let that 'urgent buyer' who is completely price insensitive and happy to buy futures in a sloppy way that almost always pushes them up do 'God's work' and then the rest of us can use normal market hours to go to the mall and support the U.S. economy.  Everyone can just buy Vanguard index funds and no one ever loses.

Anyhow....

If you recall from September 1 to mid November the unshortable market rallied non stop without any major pullback.  There was not a single session where the S&P 500 closed below the 13 day moving average - indeed most days the market would not even pullback to the 5 day moving average but every so often we'd rest a little.  Then that minor thing called Ireland flared up and we had a few weeks of issues.  But starting December 1st (remember, the first day of the month must now almost always be up per decree), we went back to our normal pattern - straight up and no closes below the 13 day moving average.


So another 6 weeks in a row of gains, and working on a 7th - gosh darn that nasty 0.1% selloff yesterday breaking our streak of always wonderful Mondays.  (but those troublesome bears could not stop the NASDAQ).  Indeed they dared to open the market with a gap down which of course was met with a tsunami of buyers who were thankful to see a once every 5 week intraday session of greater than -0.5%.

While I am more cautious the higher we go as I stated Friday, I'd at this point only be hedging with VIX calls counting on some volatility at some point (maybe the Portugal bailout ... err I mean negotiations) or an earnings miss by some multinational in the coming weeks.  But similar to November, you can't really work on actual shorting (of indexes at least) until that 13 day moving average is broken on a closing basis.  And then bears may be given a week or two to pretend they are still relevant entities.....before the next non stop months long rally in which we will never break the 13 day moving average. 

S&P 1262ish has been the floor the past week, and traders await ready to pile on, on any break over the highs of last week.   From S&P 1280 only 120 points (10%ish) until we reach most of the bulls' year end targets of 1400.  Then we go for all time highs since pullbacks are for other countries markets only!  A Goldilocks-nanke environment, indeed.

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