Here is a video of a dog that wants to play fetch with a statue.

This playful dog doesn't understand why the statue won't throw the stick, but it keeps trying. It reminds me of the games the market is playing to entice someone to play.

The Markets Are Testing New Highs.

While the S&P 500 is still below its high from October 2007, that NASDAQ Composite flirted inches from its highest close since December 12, 2000.

So, Are You Bullish?

We hear a lot about how investors are overly optimistic … but a look at the latest numbers from AAII shows that bullish sentiment has dropped to under 31%.  Again, we are near highs.  That isn't overly bullish; frankly, it seems a little strange.

Normally, I would take the lack of bullishness as a contrarian indicator (meaning crowds are often wrong at turning points … so the lack of bulls would indicate a push higher was likely).  However, I'm starting to think that there is little "real" investor capital at risk in the U.S. Equity markets right now. 

When the real money wants to play, I'm not sure it will like the game.

Here is a video of a dog that wants to play fetch with a statue.

This playful dog doesn't understand why the statue won't throw the stick, but it keeps trying. It reminds me of the games the market is playing to entice someone to play.

The Markets Are Testing New Highs.

While the S&P 500 is still below its high from October 2007, that NASDAQ Composite flirted inches from its highest close since December 12, 2000.

So, Are You Bullish?

We hear a lot about how investors are overly optimistic … but a look at the latest numbers from AAII shows that bullish sentiment has dropped to under 31%.  Again, we are near highs.  That isn't overly bullish; frankly, it seems a little strange.

Normally, I would take the lack of bullishness as a contrarian indicator (meaning crowds are often wrong at turning points … so the lack of bulls would indicate a push higher was likely).  However, I'm starting to think that there is little "real" investor capital at risk in the U.S. Equity markets right now. 

When the real money wants to play, I'm not sure it will like the game.

Recently, it has seemed like the market was looking for a reason to go up. Bad news was taken as a buying opportunity.

There was a change in market sentiment last week. The market finally found reasons to sell-off.

The move down was relatively minor and quite orderly. The S&P 500 is sitting comfortably in a support zone. The following chart shows that the move down did not come with panic selling and volume remained light.

The move back to support burned-off some of the excess exuberance. So, on the next push down, let's see if sellers get another bear trap sprung on them with a pop higher.

As I've said before, recently, if selling opportunities don't tempt sellers … Then the market will simply get pushed higher again.

Remember, a trend is in force until it's reversed.  The broad equity indices are still behaving remarkably well. It could be a meaningful sign, or it could simply be a sign that there's a lot of money on the sidelines or in other markets.

For example, last week was anything but orderly in the silver market.

Recently, it has seemed like the market was looking for a reason to go up. Bad news was taken as a buying opportunity.

There was a change in market sentiment last week. The market finally found reasons to sell-off.

The move down was relatively minor and quite orderly. The S&P 500 is sitting comfortably in a support zone. The following chart shows that the move down did not come with panic selling and volume remained light.

The move back to support burned-off some of the excess exuberance. So, on the next push down, let's see if sellers get another bear trap sprung on them with a pop higher.

As I've said before, recently, if selling opportunities don't tempt sellers … Then the market will simply get pushed higher again.

Remember, a trend is in force until it's reversed.  The broad equity indices are still behaving remarkably well. It could be a meaningful sign, or it could simply be a sign that there's a lot of money on the sidelines or in other markets.

For example, last week was anything but orderly in the silver market.

David Stendahl called me about Silver last week.  A quick glance at the chart showed a major price drop.

 
How major?  Well, after the big move up.  Silver dropped over 27% last week, the most since 1975.

Technical traders will note that Silver was running into resistance at the 48.12  Fibonacci level.   A week later, Silver is now resting at the 34.66 … which is also a Fibonacci support level.  Stendahl points out that the Value Chart indicator has formed a pivot bottom suggesting that Silver is ready to find support.  Traders will likely keep a keen eye on whether Silver can stay above the 34.66 level … otherwise, the selloff continues.

In This Case, Technical Analysis Doesn't Tell the Whole Story.

According to MarketWatch, retail buyers may have stayed invested in silver long after most hedge funds and other large investors had left.

Data from the U.S. Commodity Futures Trading Commission shows money managers’ bets that silver prices would go higher declined starting mid- February, when silver prices started to climb in earnest.

The trend suggests the so-called ’smart money,’ the large managed funds that report to the CFTC, had started to back away from silver and "retail investors picked up the slack,” said Tom Pawlicki, a precious metals analyst with MF Global in Chicago.

The CME Group, which operates the Nymex, had raised its margin requirement for speculative traders twice last week due to high volatility. These investors must now put up $14,513, per contract, for a day trade, and a further $10,750, per contract, to hold that contract overnight. Both requirements are up 24% from a week ago. For investors holding hundreds of contracts, that's a difference of hundreds of thousands of dollars.

Silver is much less costly than gold, but gold's margin requirements are less than half of silver's. The higher margins are a deterrent to new investors looking to enter the market.

Apparently, to manage its exposure during the parabolic move higher (and the shift from 'Smart' to 'Dumb' money), MF Global (which is one of the big Futures trading houses) raised its margin requirements significantly higher than the CME did.  MF Global, run by former Goldman CEO Jon Corzine, hiked its silver margin to $25,397. Consequently, MF Global's margin requirement is 175% of the CME's requirement.  The result … a rush to exit.