03 September 2014

SP 500 and NDX Futures Daily Charts - Getting Sentimental

"Also, it was in 1987 the previous time the Investors Intelligence service said in its survey that Bears fell to 13. Today, Bears fell to 13.3 for the first time since then vs 15.1 last week. Bulls rose to 56.1 from 52.5 and the spread at 42.8 pts puts the difference back in the “dangerous” camp according to II. Above 30 is a “worry.”

I want to emphasize that this is not a timing mechanism and is just a SHORT TERM indicator but at least should put to rest the belief that this is somehow a ‘hated’ rally when bears are at a 27 year low."

Peter Boockvar

"Adversity makes men, and prosperity makes monsters."

Victor Hugo

I don't think that the rally is 'hated.' But I do think that the stock market and Wall Street have become generally despised and seen as fraudulent.

AAPL was a drag on the NDX, ahead of its new product announcements.  Everything in this market today smelled of profit taking.  And well it could be, given the rocket like bounce that the indices took off the end of the last wash-rinse cycle.

And for those who called me foolish in forecasting this bounce, how that's perma-bearishness working out for you so far? 

What we are seeing is a lack of genuine participation, moreso than any real bearish inclination to selling.  The volumes that we do have are short term, speculative, and lacking in substance.  'Vaporous' comes to mind.  'Contrived' is another good descriptor.

What this lack of real buying with conviction implies is that any exogenous event can trigger a serious market index decline as the hot money sublimates.  Unless of course there is even greater central bank intervention brought to bear than we are seeing on an almost daily basis today.  And if the Bankers fail to stem the tide, we could see something quite remarkable.

In the absence of an event, I would expect us to continue on with the status quo, the regular back and forth, wash and rinse rigging of almost every market as the pretenses and facades wear ever more thin.

It is very difficult to forecast a market break.  But it is quite possible to analyze the structure of the market, and to judge it to be inherently unstable and fragile.  'Prone to accidents' if you will.

The political and financial class are way out over their skis, with moral hazard and the colossal winds of hubris at their backs.   It is a question of what exogenous event may trigger the next great crisis, and who will the moneyed interests try to blame.

Still, there is plenty of money to be made in the great Alibaba IPO, due towards the latter part of September, and the midterm elections are coming. A market decline sans crash *could* favor the Republicans.  Obama should carry plenty of blame, but he is more a cousin to that crowd than they would ever care to admit beyond the theatrics of the political wrestling ring.

This current situation appears to be unsustainable.   But never underestimate the power of paper money in the hands of frightened, unscrupulous men.  

Have a pleasant evening.