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.
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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.
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.
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I am that man.
My Trident is a symbol of honor and heritage. Bestowed upon me by the heroes that have gone before, it embodies the trust of those I have sworn to protect. By wearing the Trident I accept the responsibility of my chosen profession and way of life. It is a privilege that I must earn every day.
My loyalty to Country and Team is beyond reproach. I humbly serve as a guardian to my fellow Americans always ready to defend those who are unable to defend themselves. I do not advertise the nature of my work, nor seek recognition for my actions. I voluntarily accept the inherent hazards of my profession, placing the welfare and security of others before my own.
I serve with honor on and off the battlefield. The ability to control my emotions and my actions, regardless of circumstance, sets me apart from other men. Uncompromising integrity is my standard. My character and honor are steadfast. My word is my bond.
We expect to lead and be led. In the absence of orders I will take charge, lead my teammates and accomplish the mission. I lead by example in all situations.
I will never quit. I persevere and thrive on adversity. My Nation expects me to be physically harder and mentally stronger than my enemies. If knocked down, I will get back up, every time. I will draw on every remaining ounce of strength to protect my teammates and to accomplish our mission. I am never out of the fight.
We demand discipline. We expect innovation. The lives of my teammates and the success of our mission depend on me – my technical skill, tactical proficiency, and attention to detail. My training is never complete. We train for war and fight to win. I stand ready to bring the full spectrum of combat power to bear in order to achieve my mission and the goals established by my country. The execution of my duties will be swift and violent when required yet guided by the very principles that I serve to defend.
Tradition. Brave men have fought and died building the proud tradition and feared reputation that I am bound to uphold. In the worst of conditions, the legacy of my teammates steadies my resolve and silently guides my every deed.
A small software company, started by a friend of mine, just did something that surprised me. It bought a new iPad for each of its employees.
Some companies will justify purchasing an iPad for key executives as a consumption tool. Other companies may justify purchasing an iPad for a developer, as a way to get them used to the form factor. Still other companies may purchase iPads as an incentive to recruit or retain employees and to foster a sense of a "cool" environment.
This Time It Is Different.
What strikes me is how fast this wave of tablet computing is taking-off. Yes, I remember how many times companies have tried non-traditional PC initiatives. In fact, my attic is an electronics graveyard for many of the earlier attempts. However, this time is different. I see 60-year-old men in McDonald's using and iPad to play Scrabble. I see 50-year-old business-people doing their work using iPads on an airplane. Moreover, I see data being formatted for easier consumption on those devices.
The result is that this probably represents a fundamental change.
Back in the 90s, the Internet finally took off. Early adopters talked about how long they were doing similar things with AOL, CompuServe or Delphi. Yet, when the Internet finally took off something changed.
Would you have guessed that a decade later electronics chain stores (like Circuit City) or bookstores (like Borders) would be casualties? Think how it affected the U.S. Post Office, telephone companies, etc. The list of winners and losers from that shift can be a lesson or an example.
A Different Look at the Same Issue.
I grew up with LP records. In high school, I watched eight-track tapes give way to cassettes. Then CDs gathered market share. After that, MP3s came along. Something funny happened along the way though ... An MP3 file is just a song; but modern MP3 players allow you to carry your entire music library with you wherever you go. It's not just a linear progression; something happened and the whole value proposition transformed.
We are watching a similar technology shift happen right now. To borrow a line from Sun Microsystems, "the network is the computer".
More of our data, applications, and services are moving to the "Cloud". And a tool like the iPad can become much more significant than merely the device itself. It becomes the portal giving you access to everything on your company's private computers, as well as what's available on the public Internet. Again, the whole value proposition transforms.
A decade from now, there will be a whole new list of beneficiaries and casualties from this quantum shift.
Something to think about; who will be the big winners and losers?
While the US Equity Indices have broken out above recent highs to continue their up-trend, I hear traders complain that this hasn't been an easy market to trade.
On one hand, you'd think that a straight-shot bull run higher would feel as safe as the kiddie rides at the amusement park. On the other hand, sagging internal breadth, divergences, and the impending end of QE2 have triggered cautious instincts in many professional traders. As a result, many are selling strength, and end up under-invested during the next push higher.
It's been even more challenging for the Bears, who keep trying to identify and sell a top in this market. However, there's been little selling follow-through. My guess is that because so few people are fully invested in the equity markets, each dip (no matter how small) seems like a buying opportunity to someone.
So, how long can the markets continue to produce these straight up moves to new highs? While the answer would seem to be "indefinitely", we know that's not realistic either. This seems a lot like the market did from December through February, where we barely saw a red day; but you couldn't help wondering each day if this was the top.
A Little Politics and Economic Policy.
On a side note, Fed Chairman Bernanke held a press conference last week. It was the first ever press conference immediately following a Federal Reserve meeting. Historically, the Fed has released minutes of their meetings about three weeks afterwards. Now, they expect to hold these sessions after every meeting.
On the surface, Bernanke's comments reiterated that the Fed was resolute in their intent to stop QE2 and doesn't desire to reverse the current trend of inflation or a weakening dollar. What caught my eye, however, was how Gold and Silver spiked as he spoke.
It is worth noting that the U.S. Dollar has fallen 31% so far this year compared to Gold. Likewise the Dollar has fallen 25% against the Swiss Franc (which many consider the gold standard of Fiat Currencies). For what it is worth, the Dollar Index is barely a percentage point above the all-time lows set before the financial panic in 2008.
Heather Dorniden, from the University of Minnesota, races the 600m at the Big 10 Indoor Track Championships. What happens reminds what a race really is about ... and, perhaps, what life is really about.
Markets Testing New Highs - Are You Bullish?
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.
Posted at 02:32 AM in Current Affairs, Market Commentary, Trading | Permalink | Comments (0) | TrackBack (0)
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