Still Hoping

The market is weakening, and waiting for a fiscal cliff deal, any deal, even a small one.  The market is like Gerry Cooney, the Great White Hope.  It sort of reminds me of the debt ceiling deadline in August of 2011, when nervousness about a deal weakened the market, with Boehner in the middle of it, just like this time.  Well, we got the deal then, and made it by the deadline, and got a 1% gap up that was faded right from the opening bell, leading to a huge selloff of course not because of debt ceiling nerves, but because there was another lurking disaster that no one was paying attention to: the European debt crisis.

Well, this time, we've got everyone focused on the fiscal cliff, but ignoring the coming Q1 earnings in January which are not far away, and they will be bad again.  Slowing earnings and an economy that will be lacking much of fiscal stimulus will be on its own.  Expect this coming January to be unlike the past two.  I am expecting sharp selling that will take us back down to 1340 to retest that low we made on November 16.  And if that low scares the Fast Money crowd, then it will be a buying opportunity.  But now is a time to look for spots to sell, the VIX has already made its move higher, it is now time for the market to make its move lower, probably after a deal is done.

Sentiment Shift

The well has been poisoned.  There is no turning back now.  Sentiment has made a U turn and investors are not going to jump back in until January earnings are over.  Even with a deal, the market was poised to go lower due to the expectations for weak earnings coming up in January and the extent of the rally over the past month.  I am sure the longs are still expecting a deal, and expecting the deal to ramp up the market, but now the deal will likely be pro-Democrat, which will mean higher taxes than before Boehner's gambit failed.  The market doesn't go up on any deal, only goes up on a deal that is market friendly.  Now that the Republicans blew it, expect a more tax heavy deal than before.

Buying the Rumor

Follow the big money, they knew that a deal was going to happen weeks ago.  Now the retail crowd can feel it, and it is showing up in the price action.  But when you have so much money that is now looking for a deal and to sell a pop on the news, it sets up a potential buy the rumor, sell the news scenario.  Especially if the news comes out and takes us to anywhere close to SPX 1450.  But it is close to the end of the year so I doubt any selloff will have legs.  So it will be tricky to game, but I do think that we'll see a selloff at the beginning of 2013, even with a deal. 

It may just be best to wait for the news to come out to sell, I am sure that short sellers are very cautious here, and the longs seem very eager.  

SPX 1430 the Red Zone

The air starts to get thin above 1430, you can feel the longs get shaky legs, lacking oxygen, the market wobbles.  There are more spontaneous intraday selloffs above that level.   Above 1430, insiders sell zealously. so unless you get hedge funds chasing longs, the supply demand equilibrium favors shorting.

At the other end, you have the green zone, which is 1350.  Below 1350, insider selling is absent, bountiful Fed liquidity starts seeking equities, regardless of fundamentals, and you can't sustain those levels without popping.  There are no crashes in this unlimited liquidity environment.  Crashes are born from financial stress, panic, credit strains,  Not a slowing economy entering recession.  So don't expect huge downswings in the market just because AAPL misses earnings or GDP is at zero.  If we do get a bear market again, it will be a grinder, not a crasher.

Expecting more weakness over the coming days, 1400 is beckoning during opex week, and then when it gets darkest, I assume we'll get a deal announcement late next week that will pop us back to 1430, just in time to crush the put premiums for Dec 21 options.

Fed Protection

In the market, the longs always feel safe going ahead of the FOMC meeting.  There is an unnatural lift and anticipation due to these super easy monetary policies, but eventually the crowd overanticipates.  They overshot to the upside on more Fed insanity, realizing that it doesn't matter if the interest rate is tied to unemployment rate, because the unemployment rate will never get there, or will be manipulated to stay at 6.6 or 6.7 for the LONGEST time.  In any case, I was surprised that Bazooka Ben didn't go for a $60M in Treasury purchases with the $40M in MBS for a round hundo bill a month, just for kicks.  He only met market expectation, which shocked me.

We've had 2 intraday reversals in a row after hitting rally highs,  the market is exhausted and overbought, and one of its catalyst bullets have been spent.  The only one left now is fiscal cliff deal, and that is only a positive catalyst if its a total can kick with payroll tax cut extended.  If there is no payroll tax cut extension, you will have a recession in 2013. 

I can't really recommend shorting in the hole, but you can probably safely short around SPX 1430 for the next few days.  We might even get a decent down day for once and stay down for more than an hour.

Mo Money Mo Money Mo Money

These FOMC meetings happen just like script.  If they go away from the script, it is always to the dovish side, i.e., bigger, longer, more money printing.  After QE3, even the masses have caught on that Ben will never disappoint the market.  He will do at least as much as the media expects, and probably a bit more.  I remember when QE2 was announced, the market expectations were around $500B in bond purchases, he beat the consensus number and went to $600B, Wall Street style!  Right then and there, I knew this guy was a fraud, whose only goal in life was to please Wall Street.  He's Fire Marshall Bill and Smokey the Bear. 

So if today's expectation is $45B a month in Treasury purchases forever, he would go for $50B a month just to beat the consensus number!  He would never think about doing less than $45B because he doesn't want to "spook" the market.  As if a few billion here and there on a 4 trillion balance sheet actually matters. 

Anyway, we're overbought and right around levels right before QE3.  Only this time, everyone is expecting the move, and know Banana Ben will deliver.  I am expecting a pullback on Thursday and Friday, after the Fed does its thing. 

Pricing In the Deal

More and more signs of an imminent fiscal cliff deal is buoying this market.  The hedgies don't want to miss out on the fiscal cliff deal rally, so they are putting a bid underneath this market.  The question is, will retail come in to buy the pop off the deal or just stay away?  More importantly, will the johnny come lately hedgies pile in on the long side after the deal?  No, on both.  After getting burned chasing the market after it popped on QE3, they are going to be reluctant to chase it again here.  Once bitten, twice shy.  I am betting that the fiscal cliff rally will be even fleeter than the QE3 pop.  The market lingered near the highs for a few weeks, this time, I doubt we'll make it past a week on this deal pop.  The market is always forward looking, and earnings will not be far away in mid January, and most will not want to be too long ahead of that. 

We should have low volatility trading till the deal comes out, and then you will see size sellers come out of the woods.

Range Bound

Well, we go the beat on the nonfarm payrolls, but it was a total sell the news reaction.  The past 2 nonfarm payrolls reports had beats, and all went down after the pop.  Investors will not chase here, so you have a hard time sustaining anything above 1420.  Likewise, you have a lot of people in cash, who deploy it when we get to around 1400.  So we should stay range bound until the FOMC announcement next Wednesday.  After that, the market is on its own and I am leaning toward weakness later in the month until the fiscal cliff deal is announced.  The deal should be announced on options expiration week, the money movers always like to have timely moves with options positions on!

BTFD

We are not going to go down much from here.  We may hit 1400, but I don't see anything below those levels sustaining.  The market is too strong considering the fiscal cliff news.  The weak hands are out of this market, but there are a lack of buyers because of the uncertainty, so lack of buyers and sellers at current levels.  Europe is no longer a drag on this market, and neither is Asia.  So you have no global bombs going off anytime soon.  The overseas markets are quite strong, which is being overlooked by the obsession with the cliff.   I would rather be a buyer than seller today, looking for another push back above 1420 in the coming days.

Close to a Selling Spot

We are in a non speculative, non frothy equity market.  Retail has packed their bags and will return after the cliff resolution, no matter what the price.  But non-retail is sensitive to price and they are not dumb enough to chase a fundamentally weak market like this one to near new highs.  Only retail does that.  In a retail-less market, there is only so far a market can go higher on just momentum without fundamental backing.

The disciplined pros will not chase here, and only retail or desperate hedge funds will buy higher.  So that leaves very few buyers willing to pay up, which means the market has to go back down to entice the pros to buy.  Ok, so we have the automated money coming in for early December, but that will last maybe 2 days max.  After that, the market is on its own.  And if we are anywhere around 1425-1430 at that time, it is an easy sell.

On gold here:  this is a hiding place for those that want to be in the market but are afraid of equities.  I see very little upside and plenty of downside for the next few weeks.

Revised Fiscal Cliff View

Having seen the market play out with extreme strength despite Washington headlines that would shake out any ordinary market, the script has changed.  It tells me that we won't get much of a dip until the fiscal cliff deal, as hedge funds are still piling in.  It is the one catalyst that keeps bulls hopeful and bears afraid of being short.  It doesn't mean we can't get a small pullback, but emphasis is on small.  I don't see SPX going below 1385 before the cliff deal. 

And it will be a watered down deal which will be celebrated for maybe 1 or 2 days, and then back to reality.  That reality is weakening earnings and higher taxes in 2013.  The bears will have to wait till early 2013 to get any meaningful downside in this market, as the buy after fiscal cliff deal money comes in at year end. 

We probably get to 1430 by early next week where we'll likely stall out but not drop much.

Strong as an Ox

Hedge funds are chasing here, that is what they do.  On the upside and downside.  It's not their money!  The dip lasted for all of 30 minutes before we went screaming higher.  That tells me just one thing:  there is a big pool of money looking to get in.  Those hedge funds are probably in the 6th inning of their accumulation, so we're probably about 2/3rd done.  Usually we start going back down in the 8th or 9th inning right when the tickle me elmo hedge funds get long and strong before the crap hits the fan. 

With the beginning of December coming up, I am sure the hedge funds will be anxious to buy ahead of the fiscal cliff deal and the positive seasonality.  By the middle of next week, I will be looking to aggressively short this market, if it's trading around 1420. 

Fiscal Cliff Bumps

The fiscal cliff deal will not be as easy as the market is thinking.  No one can be 100% sure what the government will do with the fiscal cliff, but if the past is repeated, the deal will be done in the final hour with a lot of grandstanding, political posturing, and refusal to yield.  This should be unsettling for the markets in the short term, probably in the next 2 weeks. 

I would be surprised if the Republicans would give in on the tax rate hike for the rich so easily without a fight.  And this time, Obama is not running for re-election so he won't cave so easily into extending those Bush tax cuts.  Expecting a fight on both sides at least in the initial stages of the negotiation, which is contrary to the current belief that both sides are eager to get a quick deal done.  The return of Congress from Thanksgiving break is the last thing the bulls want to see.  The huge rally over the past week has set up us for a healthy pullback on any signs of a less than smooth fiscal cliff negotiation.

Still in a Downtrend

We had a really sharp rally from the lows on Friday and all of a sudden we're supposed to keep squeezing higher?  The risk reward for a long is very poor here unless you have a V bottom.  V bottoms are not common, they just seem that way because we had so many in 2009 and even a few in 2010 and 2011.  They usually occur in the most bullish of markets where demand for equities is high or equities are so cheap that they are coiled to go higher.  Neither is the case now. 

All the paper napkin technicians are suddenly constructive on the market, when they were bearish late last week.  Don't buy the hype, we're going to have to test those levels from Friday again before we make a meaningful bottom. 

Expecting a Weak Day

Batten down the hatches, we're probably going to flush the market down today.  Target of 1335-1340 zone.  The bounce play that I envisioned yesterday is not playing out.  Market is definitely weaker than I expected.  Options expiration forced selling will wreak havoc on this market if we break 1345.

Low VIX Theories

It is difficult to move down 75 points in the ES in one week and still have the VIX under 18.  Even given that the end of year is usually less volatile.  But despite the correction, the market has been going down with relative calm.  Thinking through why this is, I can come up with only two theories.  1.  There aren't many weak hands left in this market.  Even with bearish headlines, there is  a lack of volatility.  2.  Traders are complacent because since 2009, every dip has been a buying opportunity and the forces who believe in BTFD and have succeeded with that strategy are numerous and tenacious and will not cave in to ordinary weakness.

If theory #1 is why the market is not volatile despite the 75 point loss since the election, then it is safe to buy.  But if its reason #2, then it is NOT safe to buy.  I am still not sure which is a bigger factor in the calm nature of the selling, but I am leaning towards reason #1 so I am fairly constructive on buying at current levels for a trade.  I usually prefer to see lots of volatility and a VIX spike before I buy but we haven't gotten it so far. 

Options Expiration Forces

You are seeing the forces of forced selling with options expiration this week.  The lower the market goes, the more that traders have to sell.  The final hour today felt like liquidation, and we will likely get a partial continuation tomorrow, but by Friday, it should be over.  The VIX is way too low here, just because its near the end of the year, no one is willing to pay up for protection.  A VIX at 18 with this kind of action is puzzling.  I am looking to buy the blood on the Streets tomorrow, with an expectation of a bounce back up to the 1380 level next week.

Can Kicking

The upcoming can kick by the politicians will make NFL kickers envious.  There will be no fiscal cliff.  Politicians only care about the short term, and getting re-elected, and even though Obama doesn't have to, he's yielded to Republican desires over and over.  That was apparent in the debt ceiling debate last year.  That is why you continue with these temporary tax cuts that always get renewed.  House members are up for re-election every 2 years, they know that a bad economy during the next two years means it will be harder for them to get re-elected.  So they will never agree to any tax increases (Republicans) or spending cuts (Democrats)!  It is the easy way out, and Obama will cave in, like he always does. 

Anyway, Washington doesn't need to be fiscally disciplined.  It has the Fed printing all the money to buy the bonds that are being issued to pay for all the tax cuts and deficit spending.  So you have yields going down despite huge budget deficits.  And the foreigners (mostly just China) park their money in US debt in order to keep their own currencies in the same crapper, fearing their exporter golden gooses will get killed with a stronger currency.  They need to buy US dollars in order to manipulate their own currencies lower, preferring to hammer their working class for the benefit of the big corporations (state owned enterprises).  Hello crony capitalism, China Style.

So a situation which should lead to clear dollar weakness only leads to slight weakness, because of competitive devaluations. If on the very low chance that we see actual fiscal discipline and a repeal of most of the tax cuts, the market will be carpet bombed in 2013. 

We have one more push lower coming soon, down to around 1360, which is buyable for a couple day trade.  

AAPL and the S&P

A company can only get so big before it saturates its market.  Unless the company turns into an unwieldy conglomerate, ala the 1960s (market cap growth but not stock price growth), you cannot have much market cap growth when it becomes as big as AAPL.  It is the law of large numbers, and it has done in numerous companies over the years.  MSFT and CSCO are the two that come to mind.  I strongly believe that AAPL has hit its all time high this year and will now be trending lower over the coming years.

Remember that the growth in the EPS of AAPL has been a huge contributor to the growth in EPS of the S&P 500.  A weakening AAPL is a bad sign for future S&P 500 EPS growth.  To understand the fundamentals of the S&P index, you have to understand AAPL.

Let's remember that AAPL is a hardware company, not a "hardware/software/cloud company".  If you don't buy AAPL's hardware, you can't use their software.  The concept of cloud is BS, it is a glorified name for internet data storage.

The history of hardware companies is littered with carcasses, especially consumer hardware companies, one being the former AAPL before the smart phone boom.  Hardware companies, especially consumer hardware companies, eventually become commoditized and gross margins shrink.  AAPL is not immune from this reality, no matter how many AAPL zealots are out there.  If you sell a product, for example an IPad or IPhone at a higher price than your competitors, when there is basically no quality difference, you are essentially trying to turn yourself into a mass luxury brand. I don't know of any luxury brand that can maintain market caps at $400B, $500B.

The reason AAPL was so popular was because its products were clearly the best out there, with competitors bringing out inferior products.  That has all changed.  Samsung and numerous others are quickly catching up, and in Samsung's case, probably already surpassing the quality of AAPL products.  Now you have the death knell of a hardware company.

1. Increasing competition bringing out equivalent or even better, cheaper products.  Gross margins get squeezed hard in the future.
2. A maturing market, with less room for growth.
3. Leadership in the company that becomes arrogant and runs out of innovation.
4. Too faddy and pervasive in the overall market. 
5. Relying on vendor subsidies to meet consumer price points.  Hard to see that continue when the products lose popularity.

AAPL is repeating history, the same way it did with the personal computer, it is doing with the smart phone and the tablet market.  It's arrogance will bite it again, as most consumers will not pay much of a premium for name brand electronics like they do with hand bags, watches, clothes, etc.  And if AAPL doesn't charge a premium, well there goes their gross margins.  Damned if you, damned if you don't.  And lastly, the IPad is a consumer toy, it has no room for serious corporate use.  Good luck trying to type a long report on an IPad.  It will never replace a laptop.

No Snapback Rallies

There was a sea change in the character of this market after the election.  Before we had a slow weakening market but now the downtrend has matured into a more volatile, top heavy market.  The rallies just don't last and we'll likely to see multiple 1 day rallies which will only lead to selloffs the next day for the rest of November.  With options expiration next Friday, I expect the market to stabilize, although likely at lower levels from here.  I still think we don't breach 1350, but now I see us trading more between 1360 and 1390, not 1370 and 1400. 

You can probably safely buy dips and sell rips for the next 2 weeks, after that I think we'll squeeze higher for good back to 1430 once the market figures out that the fiscal cliff will just end up being a fiscal can-kick. 

Close to the Bottom

I have been keeping a close eye on the SPX 1370 level, which was the 2011 high and was an important support/resistance level in the middle of the year.  We are less than 10 points away and I expect the level to hold.  We could get a slight overshoot down to 1360.  I don't expect 1325 or even 1350 to hit on this down move.  The first act of the slow motion crash in AAPL is close to completion, which means we're going to have a hard time breaking hard from this level. 

One thing that sticks out is the VIX going down on a day when we're selling off and making new lows.  The smart money is not willing to overpay for options here, meaning we're not likely to see a big move down.

It's Already Started

On CNBC, all they are talking about is fiscal cliff.  This will be repetitive for the next few weeks, and it will depress the stock market.  It is already taking away from the post-election "certainty", as if the uncertainty of the election was really holding back investors.  Anyway, expect increased volatility and lower prices for the next few weeks, as the fiscal cliff debate begins.

Election Relief

Barring a very low probability scenario of an undecided winner on Wednesday, the market should have a relief rally on the removal of uncertainty.  With a Romney win, I expect a big squeeze in stocks for the week.  With a more likely Obama win, I expect a healthy 2-3 day rally which could have us challenging the 1435-1440 level.  Any kind of relief rally should be brief because the real worry on most investor's minds is the fiscal cliff, and that will be the talk of the Street for weeks to come, putting a drag on the market even during this seasonal strong period. 

U.S.S. Crowded

This ship is taking on water.  When the obvious of US outperformance becomes so pervasive, you get money managers dumping Europe, Asia, anything but U.S.  We have pushed the limits of the US outperformance trade and the strains are now evident.  The symbols of US stock outperformance:  AAPL, GOOG, and other tech darlings have been skinned.  I am not calling for a top, just calling for a top in U.S. stock outperformance.  The fiscal cliff will bring some reduction in deficits, and that trend of increasing budget deficits will not sustain, which will pressure U.S. corporate profits.

The fiscal cliff reminds us that the sole reason for U.S. outperformance is government/monetary policy.  If you give people free money in the form of various tax cuts while adding pork stimulus, you can create a bull market.  It has nothing to do with superior companies in the U.S.  Europe didn't stimulate, and it has suffered as a consequence.  You take away the tax cuts and deficit spending, and you have Europe in America. 

Sell rallies till the words "fiscal cliff" bleeds out of your ears.

One Day Wonder

Traders have moved on past bad earnings, on to something perhaps worse.  The fiscal cliff.  The elections next week will be a nonevent unless somehow Romney wins, which will be a short squeezer.  In any case, the fiscal cliff will be the big worry after the elections and should create a volatile market. 

This year has been the least volatile since 2006.  It has sucked the life out of ES trading.  My theory about volatility is as follows:  markets are the most volatile around bottoms.  Markets are the least volatile in the stage leading up to the formation of a top, not at the top.  When forming a top and ending a bull market, the volatility rises before the downtrend.  Just based on the low volatility of this year, this bull market probably has another 6 months to 1 year left in it. 

We haven't had a rally in ages it seems.  We finally got one today.  The rally should not last for long and is a sell opportunity.  I expect weakness tomorrow.

Bottomed in Overnight

Well, we got the fear from Hurricane Sandy, unfortunately, it was only allowed in the overnight session, would have liked to see panic on Monday if trading was allowed.  We never got that panic, so we're back to middling markets, with no edge.  I would sell any rallies that take us to 1420 zone as I expect a revisit to those Globex lows sometime soon.  Europe and China are now outperforming the US, a sea change from what has happened over the past 3 years. 

Potential U Bottom

The behavior of this market with the market only down 60 points from the highs is getting the Fast Money nervous.  That takes away the potential for a V bottom, which usually only happens when you get either a selloff that happens so quickly that it takes traders unprepared, or a selloff so deep that you end the down move with heavy liquidation.  This selloff has been slow in developing which means we'll not go down much below yesterday's lows.  I doubt if we even touch 1390 on this downleg.  And then a few days of volatile back and forth trading and back towards 1450. 

Mini Waterfall

We haven't had a waterfall decline since May.  This one is building up momentum, the crowd is going from bullish to bearish.  Anecdotally, I am seeing nervousness about tech, which is spilling over to the general market.  With the FOMC meeting tomorrow, I doubt that we see a flush out within the next 2 days.  But since we've already opened up the can of worms, there isn't any going back until we finish this little waterfall that we are working on.  The time window for a waterfall decline is the remainder of October.  As November comes around, most of the earnings will have already been reported and the decline will be in its 3rd week, which is usually near the end of most pullbacks in an uptrend. 

Big gap down today just confirms that the market is very vulnerable over the rest of October.  Any 10 point ES rallies intraday are selling opportunities for the rest of the week. 

Earnings Backward Looking

Weak earnings are not going to be reason we go into a bear market.  They are a symptom of a weakening economy, but markets can go up when the economy is weakening.   Just look what happened from June to September. 

The bear market will be begin when the Fed and ECB can no longer "beat the number", as in beat the expectations.  Expectations are quite high, because we can't seem to brush off these mini bear raids with such ease. 

The usual textbook relating the economy with the stock market doesn't apply right now.  Usually a weakening economy leads to a weaker stock market which then bottoms right when all the bad economic data hits, as the market looks forward to the boom cycle.  But we've been going up even with weakening data, as if the bust cycle and the boom cycle are occuring simultaneously.  We've never seen such hyperactive action from the big central banks.  They are manipulating the bond market, but can that spillover to meaningful lasting manipulation of the stock market?  If you can answer that question, you have the crystal ball for the next year of stock market action.  I am leaning towards no, they can't. 

Surprising Weakness

The market crumbled much quicker than expected.  I have never seen a market being led down by tech except during the tech bubble, so I don't expect the Nasdaq weakness to cause the S&P to collapse.  We should crack 1425 this time down and take us to 1400-1410 zone for a buying opportunity.  The time window for a sharp move lower is probably only about 10 days, so the bears have to get busy and do their damage while it's their time.  Once we finish up with earnings and enter November, I expect the bulls to retake control.  There is a slim chance that we get to 1370 on this down leg but the cautious posture of the investment community due to weak earnings makes it unlikely. 

Don't Have to Swing

 "There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. "  - Reminiscences of a Stock Operator

Right now, I don't see much of an edge in any short term time frames.  No trade feels urgent to me here.  The Fed has rigged the market and the intraday volatility is low.  It has been a rather uneventful month of action post QE forever.  The Fed got what it wanted, a risk rally, a weaker dollar, and higher probability of Obama re-election with the higher stock market.  S&P is overvalued but it was overvalued a 100 points lower so it doesn't make much of a difference short-term.  Longer term, it does set up more interesting times but we've got to see more signs of distribution and topping.  The crowd just isn't bullish enough here considering the resilient market for this to be a good short opportunity. 

Emerging markets have been outperforming over the past month.  Investors are really reaching here going for emerging markets to play catchup, or even Spain because they will ask for a bailout.  I would view emerging markets, which is basically another way of saying China, as being the worst market for long term investment at this point.  Spain would probably be close to the top of that worst long term investment list.

HFT Ruled Market

You don't have much zig zagging in this market.  It is just find the direction and go there, and stop, and flat line.  This is what has happened for the past 4 days.  The market just looks dead, not many humans involved, just bots battling against other bots.  We are closer to the support this market should find but it doesn't "feel" like a bottom.  The volatility is low and everyone is just watching.  You need action and traders to trade to create bottoms.  We might have a rally anytime now, but I don't think it will last more than 2 days from these levels. 

Following the Script

The market is pulling back off the nonfarm payrolls high and we're probably halfway through the first phase of the pullback.  We should continue to weaken for the rest of the week into Friday, as traders cut risk ahead of earnings which will come out in full force starting next week.  There is strong support in the 1400-1410 zone, so that is probably the area to buy/cover.  I see very little probability that we get back to 1460 before we hit 1410.  No positive catalysts so de-risking will be the name of the game.  And there is a lot to de-risk, we really got too much buying into "good news" over the past month. 

Crowd is Less Bullish

It is true that the investing public is less bullish now than on September 14 when we were trading at the same prices.  But you have to realize that the funds and retail piled in over the last 3 weeks, a lot of buying power was spent.  So you've satisfied 2 groups of bulls, those that wanted to buy momentum, they bought right after QE infinity, and those that wanted to buy the pullback, which happened last week.  There could be a minor subset of investors waiting for a deeper pullback to get in, but it seems from all the market talk that most of the big money isn't in that group, and were anxious to get in before the train left.  So if the market plays out like I think it will, if we go back down to 1425, it should prove my thesis that most of the buying power was used.  And the market will almost certainly continue down from 1425 to 1400 before finding support. 

Today's nonfarm payroll report is a classic example of data fitting the purpose.  You had weaker data reported the last two months, to get QE 3 fired up, and then you had positive revisions to more accurate numbers this month after the QE gun was already shot to boost sentiment.  So Obama gets a boost in both cases.  I may sound like a conspiracy nut, but the unemployment rate going down to 7.8% during THIS month is laughable.  Why the sudden drop in those looking for work?  We know most of the public looks at the unemployment rate and not the number of new jobs.  These jobs numbers are almost as blatantly made up as the CPI numbers, if that is even possible. 

Intraday Volatility

You can just feel it in the action.  This is much different than when were trading at 1453 in mid September in a super tight intraday range.  The action is much more two way, with eager buyers and eager sellers.  Increased volatility intraday while we churn.  Same price, different price action.  There is a battle going on, where as before, the bears not only didn't put up a fight, but they didn't even show up.

The Obama - Romney debate was an excuse to gap up the futures, and I'm sure we'll get a spike higher on a favorable nonfarm payrolls report, but afterwards, the cycle sets up for weakness heading into Q3 earnings.  The market has given us a lot of information since September 25, our first sizeable down day after QEinfinity.  As expected, we bounced back off the first pullback, as it is almost always bought after a strong uptrend.  The question now is do we consolidate for a few more days early next week or do we go down in earnest right after the nonfarm payrolls report.  I don't know, but either way, I would be favoring the short side over the next 2 weeks. 

The Last Hurdles for Bears

The ECB, BOJ, and NFP.  The bears somewhat fear the first two, and don't fear the last one.  They should fear the last one.  The nonfarm payrolls are due for a beat of consensus, and wouldn't that fit in nicely with Obama's campaign.  After all, we did get beats on ADP the last two months, so we're due for a catch up by the US government labor statistics.  They're all made up anyway, and they will do what they can to achieve objectives: provide an excuse for QE3 last month(weak number), and help Obama's re-election this month(strong number). 

We are in a manipulated financial world, but supply and demand still matters.  We have had a lot of ETF inflows since the ECB and FOMC went balls to the wall.  Despite these inflows, we've made no ground higher over the past 3 weeks.  Despite the cries of 1500, 1550, new all time highs, QEinfinity has not caused prices to rise.  The market jumped, and fell right back down. 

The intraday volatility has increased since last Tuesday.  It is noticeable in the intraday trading.  This increase in volatility while trading sideways, a sign of a topping process.  I believe the last gasp higher will be on a strong nonfarm payrolls number, and then it should be the start of a pullback in earnest next week. 

The Next Rally

This market is set up for a rude awakening.  There will be a bounce from this current pullback, probably either on Friday or Monday after CNBC stops showing videos of Spain riots.  But we are getting the increase in volatility that I've been waiting for.  I still want to see some rally attempts that fail to make absolutely sure that we are going lower.  But it looks like 1450 and higher is safe to short next week.  If we get there. 

There is way too much complacency in this market with "In Fed We Trust".  With earnings coming up next month, more anxiousness building for a possible fiscal cliff, and China crashing, you have a lot of bearish catalysts coming up.  Targeting a sharp pullback, 80-100 points (between 5-7%) by mid to late October, to around the 1350-1370 zone.

Volatility Crush

It is a sad time to trade when a bunch of daytraders get excited over a 2% pullback in a stock (AAPL) and wonder if this is the beginning of the end for the stock.  Fast Money is talking about AAPL, because there is nothing better to talk about in this market.  The VIX buyers must be the dumbest group of traders on the planet.  They have to pay up and get beaten up every day with the steep contango, see absolutely no signs of any volatility, and have the Fed eager to talk up the market with promises of more money printing at anytime, through their mouthpieces in the media. 

This is a very unnatural market, a manipulated market, trading like a Ponzi scheme.  I have never seen this before.  There are no precedents.  We are going into the unknown, at overvalued levels, both in stocks and bonds.  Ponzi Ben has done more to kill HFT than any regulation coming from the SEC or CFTC.  We're back in a time machine, trading the 2005 market with VIX in the 13s.  At least you can take a nap without worrying about the market moving!

Pigs and Cattle

The game never changes.  Livermore was right.  Speculation is as old as the hills.  One day you have the crowd excited about more bond buying, this time in Japan.  The next day, the crowd is disappointed that it won't be enough.  Same story, different price action, different interpretation of the same news. 

Traders are like pigs and cattle.  They get force fed, not corn or hay, but news.  They eat it up as a source of guidance for the trading day.  Now we are gapping down, supposedly on "weak" China PMI data, as if that is a big surprise.  News is found to fit the price action.  If the market is gapping up, the media goes scouring for good news stories to headline.  If the market is gapping down, bad news stories.

There have been a lot of ETF fund inflows since the QE3 announcement, so the crowd is getting into stocks now.  After being lukewarm to the stock market since May.  I don't expect these inflows to last, because I don't see the rally lasting.  We are too high for a long lasting rally.   Retail will panic again when the market starts downtrending. 

Mind Numbing Range

The HFTs must hate Bazooka Ben.  The volatility has been sucked out of this market in the ES, and everything else except crude oil.  Either half of Wall Street are Jewish on vacation or we're going to have to live with nonexistent volatility for rest of our QE infinity lives.  Who needs options when you are trading 6 ES point ranges every day?  The last missing ingredient for a top is range expansion, while trading sideways.  Definitely not there yet.

Counterforces in Commodities

In the commodities futures market, you have two main groups:  speculators and commercial users.  They are now set for a collision course.  They are due to monetary and economic forces at work.  With the Fed hellbent on increasing its balance sheet at 33% annually, about $1 trillion, from its current total of ~$3 trillion, you have a natural desire by speculators to protect themselves from possible inflation by buying hard assets.  End user demand in the commodity is being ignored in a rush to buy before the next guy, the sell to the greater sucker theory.  

But the economic forces are bearish for commodities.  Unless you believe the Fed buying MBS will revive the economy, then you can't be a buyer based on long term  fundamentals.  Europe is hopeless, and will have zero growth for many years.  U.S. can't grow more without bigger tax cuts and pork, not likely to happen next year. 

The biggest and most underestimated factor is the popping of the China real estate/infrastructure/manufacturing/inventory bubble.  They are all interconnected, fueled by negative real interest rates.  China hit their saturation point a couple of years ago, and even overshot that level.  Now its stuck with a bunch of ghost cities, empty apartment buildings, huge stockpiles of various commodities, and piles of bad debt on worthless local pet projects.  The bubble is popping.  Shanghai Composite is in a deep downtrend, getting closer to those 2008 lows.  It is trying to join Spain's IBEX index for the dubious honor of worst performing market since October 2008.  

Rich commie insiders are trying to take out as much money out of China as quickly as possible ala Russian wealthy in the late 1990s.  China is extremely deflationary.  And underestimated by the investor community.  This is something that is being lost in the euphoria of QE3 and the desire to protect against insane money printing. 

The worst commodities from this China supply demand vantage point are copper, coal, oil, and yes, even silver.  A lot of silver goes into making solar panels, much of that being produced in China and no longer in demand now that governments are less willing to subsidize this money loser.  Fundamentally, gold should be fine, because it has no industrial uses, but I can't picture going up while all the others go down.  Only for fleeting moments does gold go higher while industrial commodities go lower (sharp spikes in May 2010 and August 2011). 

Who do I think wins this battle?  Over the next year, I expect deflation to win over, but eventually it will be inflation.  It always is.  The deflation forces from China will spook Eager Beaver Ben to bring out his uzi once again in 2013, this time shooting out as much money as possible until he has a corner on MBS and 10+year Treasuries, causing a run on the dollar with every mom and pop investor clamoring for commodities.

Ambitious Targets

For the first time since we bottomed in 2009, I am hearing cries of S&P to 1500, 1550 and new all time highs from MANY people.  Those willing to short this move are few and far between. 

The index and equity call option activity is through the roof today, more than the elevated levels yesterday.  Brian Kelly on Fast Money was bearish at the bottom last week Tuesday, near 1400, now he's rip roaring bullish at current levels.   If this isn't enthusiasm, then I don't know what is. 

Back to my blueprint for a top that I posted in August, I can check off two more items: 1)  bullish sentiment, enthusiasm, and new highs 2) A shot of good news UNLIMITED QE.  There is one item left: increase in volatility as market goes nowhere.  This should happen in the coming weeks.

Banana Delivery

We got the bananas out on time.  And more than expected.  And unlimited.  Apparently there were quite a few who were caught flat footed by this QE3, otherwise we wouldn't have had such a sharp rally on something that was imminent and hinted at over and over.  Now what?  The knee jerk reaction is to sell the dollar, buy gold, oil, other hard assets, and stocks.  Timing tops are more difficult than timing bottoms.  You don't have that crap in your pants moment like you do at bottoms.  Instead the market lingers near the highs, consolidates with increasing volatility, and suddenly goes lower.  The length of the consolidation is hard to time, but it should start next week, where we'll likely trade in a range for a few days, get traders used to these prices, more comfortable buying stocks at these prices, and then the next catalyst will be eyed. 

The X factor is the hedge funds, how will they trade the remainder of the year?  Will they chase longs and try to catch up with the S&P and risk buying at the top and going negative on the year?  Or will they play it safe and try not to have a disaster of a year (i.e. going negative when the market is up so much)?  My bet is that most will go with option 2, and just try to survive this year, and be safe in the company of the mass of underperforming, but still positive on year hedge funds.  Without hedge funds chasing this market higher, I don't see us going much above current levels.  The retail crowd and insiders are not likely to be buying. 

Gut tells me that the dip buyers will keep the market from plunging anytime soon, but the extent of the rally on anticipation of central bank news means more volatile times ahead.  I don't see a crash, those only happen in an environment of financial panic, and that doesn't happen anymore with activist central banks.  Instead, we'll likely get a grinding move lower that will be punctuacted with sharp, fleeting countertrend rallies based on central bank "news". 

QE2 Template Doesn't Fit

The last time the Fed went on a bond buying spree, it was November 2010.  The market initially went higher and then had a pullback which was a golden buying opportunity for a monster rally into new highs.  The S&P was at 1180 then.  We were still in an inventory up cycle after the paring down of inventory in 2008-2009.  It is now at 1439.  Valuations are not cheap anymore, in fact, they are expensive considering where we are in the economic cycle.   Unless we get irrational exuberance into stocks, I don't see a continuation of the rally.  I see that as a very low probability event. 

The bond yields, both Treasury and MBS are so low now that only marginal gains will be made with Fed purchases, making monetary stimulus much more limited this time.  So the only catalyst for higher prices is hedge funds chasing the market higher and animal spirits.  Both should be limited.  We have run up a lot ahead of these central bank events, because that is what kept us out of the abyss during the summer.  It is payback time now that the news will finally be released. 

I am sure Ben will not disappoint the market, he never does.  So expect a QE3 bazooka today and euphoria that will lead to a one or two day rally.  And then short term consolidation next week and then a new downtrend. 

Don't Be Relieved

After the Fed comes out with QE3, you will finally have all the potential bad news AND good news out of the way.  So there will be relief and concurrent with that emotion, prices that reflect it.  But the market is always looking ahead, it doesn't look back.  QE3 is almost in the rearview mirror, I don't care if its unlimited QE, because that is the base case assumption now.  Unless a lot of the Fed money into Treasuries and MBS ends up in stocks and commodities, you don't get a continual uptrend.  You may get money that is just stuck there in Treasuries and MBS taking yields even lower. 

Let's see how many positive and negative catalysts await after QE3.  Just from what I am hearing, they are ALL negative catalysts!  Not one single positive catalysts after QE3.  Q3 earnings are going to be bad.  China continues to slowdown.  Election uncertainty coming up and the fear that Obama will win again, because he's ahead in the polls.  Fiscal cliff.  Maybe the only positive catalyst that I see mentioned is if Spain asks for the bailout, but that's probably expected by most as being inevitable. 

So it's a really bad time to be relieved after we get QE3, because news-wise it is all downhill from there.

Blowoff Move

The upthrust over the next several days will eventually lead to the final call for alcohol.  The zenith of the buzz.  The hangover is around the corner.  I expect us to make a top for the year sometime in the middle of September.  The S&P is at a new 4 and half year high.  The S&P 500 P/E ratio is above 14.  For what? Potential 5% earnings growth with profit margins at all time highs?  Unless you get a wholesale investor sentiment shift away from bonds into equities, you cannot sustain the uptrend and get multiple expansion.  In the end, it is about supply and demand. 

The only way you increase the demand is through insider/corporate purchases, or investor/ fund inflows.  The insider/corporate purchases are dying down, so we need inflows to move things higher.  It is highly doubtful that you get that inflow wave into equities that can take us to 1500 and higher.  Investors have been burned so often in equities that they are now gun shy, willing to forgo any additional marginal gains for relative safety in bonds.  This is a secular shift that is still ongoing.  That is why we topped out at 1370 last year, and we stalled out earlier this year at 1420. 

The uptrend in U.S. stocks is coming from funds that are taking money out of global equities and piling into the U.S.  The U.S. equity market is the sole hiding place for stock investors, inflating valuations and keeping this trend intact.  But the music will stop with the upcoming elections and fiscal cliff, I expect a risk off move in late September into October ahead of these potential downside catalysts.

Squeeeeeeeeeze

The news came out and we've got only minor sell on the news reaction despite a huge run up overnight.  The market is too short and underinvested here.  The fear of a sell the news reaction was greater than the reality.  I expect us to squeeze higher intraday into the nonfarm payrolls number which should beat expectations.  The chase for performance is now on.

That's it?

That was a pathetic bounce off what should have been a blockbuster rumor headline of unlimited ECB bond buying.  The futures aren't even positive off the 4;15 close.  The funds are turtling up here, they see the weak earnings coming in from Fed Ex, etc, they see China crashing, and the only positive catalysts are all telegraphed (ECB, Fed) and fund managers fear disappointment if central banks don't pull the trigger.  Despite this, its too hard to short, even when it seems so intellectually compelling, because the price action doesn't tell me that we're ready for the down move.  And I don't want to get my face ripped off when Banana Ben shoots his uzi.  And yesterday on Fast Money, it was a parade of bears despite a flat day.  Too tough here, have to wait.

Waiting to Act

The weakest equity markets in the world are in Asia.  Japan is trading like it's still in a deep recession.  China is trading even worse.  India is also bad.  Australia remains weak.  Yet the U.S. market is less than 2% away from post 2009 recovery highs.   Europe is no longer lagging and trading about even with the U.S. equity freight train over the past few months.  It is no coincidence that the 2 world markets that are performing the best have also had the most central bank yapping.  I cannot remember a time when almost all of the attention was focused on central banks for so long.  It has been like this for months. 

The whole market is a house of cards right now getting built higher and higher.  At current valuations, with this kind of economy and lack of insider/corporate equity demand, the market just can't go much higher. 

A top is approaching, but timing tops is always tricky, more difficult than timing bottoms.  Tops are processes, and usually you want to wait and short when there is enthusiasm.  I don't see that at all right now, so I can't short this market.  But going long doesn't feel all that great either, with the current fundamentals and valuations.   So we're left to wait and react.  I am looking to short enthusiasm.  It could be coming within a couple of weeks, probably from an announcement from one of the central banks. 

Lowering QE3 Expectations

A few weeks ago, the market was totally sure that there would be QE3 by September's meeting.  But now the consensus is not so sure.  It makes for a trickier environment.  If we had the consensus believing that QE3 was on the way in September, then it would offer an easy sell the news opportunity.  Now that is not the case.  Of course, things can change with whatever Blue Horshoe messages come from Bernanke to the Wall Street Journal's Hilsenrath.  This Jackson Hole speech shouldn't offer any promises of QE3 in September, but that doesn't mean they won't pull the trigger.  My gut tells me we go higher from here, top out and then make a strong move lower.  It just doesn't look like a top yet, with the investing community still not totally sold on buying this market. 

QE3 is Coming, Surprise!

The eager beavers at the Fed are chomping at the bit to print more money.  It is what they do.  And they act as if they are doing us favors and saving the world economy.  How many PhDs do you need to press the print button?  QE3 will not increase earnings for corporations, unless they print so much money that you will see $150 oil, and you can add a 1.5x to everything, asset AND consumer prices included.  The problem I have with the market is not the economy, but the valuation relative to earnings growth.  Earnings growth is just not there, but we're still priced at levels that seem rich considering the low growth environment and already high profit margins. 

As for the market, I see a pullback that is imminent, one that should knock out some of the complacency in this market.  But I still expect higher highs and higher lows for at least the next few weeks, due to the anticipation for QE3 and ECB bond buying.  Until then, we'll have more boring, low volatility trading.

Blueprint for a Top

As we grind higher and higher, here are a few things that I am looking for that will show that the top is near:

1.  A chase for performance, gravitating towards the higher beta outperformers like AAPL.  Tech stocks go up disproportionately.  Check. 
2.  Lagging transportation stocks, and lagging lower beta stocks.  Check.
3.  A break to a new marginal high that gets the crowd bullish and believing in 1500, etc.  Sentiment indicators indicating lots of bullishness.  Not there yet. 
4.  A shot of good news that get those on the sidelines into the market, an ECB bond buying program announcement, a China stimulus package, or QE3.  Still waiting. 
5.  Increase in volatility while the market goes nowhere.  Not there yet. 


So we have 2 out of 5 on the checklist, once we get 4 out of 5, I will be looking more actively to sell short. 

Slow Trading

The volatility has gone out the window and the market is struggling to break out, but also doesn't want to go down, so we have the VIX go down into the 15s.  A small pullback looks imminent with the elevated call activity in index and stock options.  I just don't see this thing going below 1386 on any dip, and the upside is limited as well.  But likely a slow grind higher into August options expiration next Friday. 

Dip Gobbled

The market wants to go higher, the dip yesterday down to 1350 support was quickly bought and not giving investors time to get in at lower prices.  Even with the disappointment from the Fed and ECB, we are back above the close from last Friday.  Good price action on disappointing news is a sign of a bullish market.  The economic data is just a distraction, its what will Ben and Mario do?  That is all that matters.

Buy da Dip

The market lulled me to sleep the past few days and woke me up today.  ECB will deliver, and probably soon.  Today is another fear induced buying opportunity in a giant Ponzi scheme rally.  Bill Gross recently mentioned that equities are a Ponzi scheme.  He forgot to mention that its a Ponzi scheme sponsored by the U.S. government and Fed.  It doesn't take away from the short term trading opportunities which are based on perception, not fact.  The perception that is now forming is one of central bank rescues, leading to sharp rallies, and even though we got short term disappointment yesterday and today from the Fed and ECB, they will provide the goodies eventually.  So fund managers don't need to buy puts, since they got a free one courtesy of the central banks.  But remember, once the put is exercised, there isn't another one at least for a while.  But the put is still open, and if that is the case, the market will not fall much.

There is a strong air of skepticism about the rally over the past few weeks, because the economy is weakening noticeably and earnings are lackluster.  I agree with the skepticism, but the stock market is about perception more than reality.  Eventually they merge, but right now the divergence should continue and perhaps widen before it reaches a breaking point when optimism peaks.  In the meantime, you can buy weakness until the bullets are fired.

Back to a Grind

The VIX is at 17.  The market volatility is getting sucked out.  With central bank backstops, the complacency builds momentum and we will grind higher.  The longer the Fed waits to do QE3, the longer the grind.  But eager beaver Bernanke can't stay still, he's got the itchiest trigger finger among the central bankers.  He will shoot money bullets at the slightest signs of weakness.  And keep shooting until he's replaced.  Draghi is Bernanke Light, less filling but made from the same stuff.  Mad money printers are taking over the world, giving governments a free pass to spend by artificially lowering their interest rates, and it will not stop until inflation gets out of control.  We are not at that point yet, but it will happen within the next few years.  Prepare for a grind the next few weeks.  It will get tedious and I will just wait to strike when it gets close to a breaking point.

Zero Gravity

We have liftoff.  Just reached new recovery highs after the June 4 bottom on the S&P.  The market has spoken, the fund managers are frontrunning QE3 and SMP.  Draghi has now come out with headlines about bond buying, LTRO, rate cut, the kitchen sink! 
Fund managers know that if they wait for the official announcement, its too late to buy.  So they are buying ahead of it.  The Fed's mouthpiece, Jon Hilsenrath, has provided the equivalent of the August 2010 Jackson Hole speech, signaling an upcoming QE3.  The Fed will likely delay the official QE3 announcement till September to build up the anticipation.  ECB and Fed are dangling crack in front of the financial community.  We are likely headed higher into September, the money printing rally has kicked off!

Central Bank Rally

The central banks are winning.  Everyone knows that earnings were bad and the economy is getting worse but with central bank backstops, the market can't stay down.  Everyone knows that QE3 is not a matter of if, but when.  Same with ECB bond buying.  So until we get QE3 or ECB bond buying, the bulls will always have a positive catalyst.  It looks like its just better to wait for Banana Ben or Super Mario to save the world and then short.  I expect the market to drift higher until the FOMC meeting on August 1. 

It's a Fiscal Problem

The market reflexively rallies on these comments from central bankers promising more liquidity and bond buying, but that doesn't solve the problem.  The Europeans aren't ramping up their government spending/tax cutting as much as the Americans.  That's the difference. 

Next week, on August 1 is the FOMC meeting, and on August 2, is the ECB meeting.  I am sure we will have a lot of anticipation going up to those 2 events.  If they don't bring out their big guns, the market will be extremely disappointed.

Point of No Return

The crisis in Spain has reached a point of no return, from a market standpoint.  We are now going to have to hit rock bottom before we turn around.  Also, Greece is now on the drink of default and exit.  The market will not bottom until the bazookas come out from the ECB.  It looks like we need to see lower levels and more panic before that happens.  Same goes for the Fed, who will only act if the market is lower, at least under 1300 and probably needs to be closer to 1250.  I don't see a range bound market anymore.  The situation is just too dire for us to stay in this benign range. 

In the Middle

The market has pulled back after the surge last week and we are now in the middle of range.  Monday brought on some fear, but it was too short lived to really shake the bulls.  With AAPL up ahead after the close, I don't expect aggressive action by the bears.  Also just a few minutes ago, the Flash PMI numbers came out, and even though they were worse than last month, we are rallying on it because traders probably expected worse.  GDP numbers on Friday and next week's FOMC meeting will be the events coming up.  I don't get it, but GDP tends to move the market even though it doesn't forecast anything about the future. 

With Spain and Italy's equity markets so depressed, it doesn't seem like the same trigger for a crash.  A scare, perhaps, but no crash.  You only crash if there is a lot of air underneath, not when you are near 2009 low levels.  Only if China crashes, would I consider that as having potential to crash the US market. 

Up on Bad

This week, the economic numbers keep coming in below consensus, earnings are slowing, and the earnings plays still pop and the market still keeps going higher.  It looks like the May selloff took out the weak bulls.  Now, you have mostly the true believers in this market who will only sell if things get really weak.  The hedge funds are up sh*t creek.  They have been selling the dips and buying the rips, and can be seen by their massive underperformance versus the S&P this year.  The S&P w/ dividends is up over 9% in the first half of the year, and hedge funds are up 1.7%.  They are underperforming bonds, stocks, everything.  This is on top of last year's very poor showing where they got trounced by the S&P. 

I am surprised that there are hardly any redemptions at these funds, it seems like another big asset class that has mediocre performance, but with big fees.  Worse than mutual funds, if that is really possible.  I am betting that the hedge funds will have to soon chase for performance, getting aggressively long, and will start getting desperate if the market doesn't fall soon.  That is the only downside I see with shorting right now.  The market is in denial, but it may stay that way until more hedge funds pile in and mark a top. 

Tide of Fund Money

Tuesday saw a huge tidal wave of fund money come in.  The ETF flow numbers hit $25.7B, when the number is usually within +/- $3B.  So you had 10 times the normal inflow on Tuesday.  This usually doesn't mark an exact top, but it tells you that most of the gains on the upmove have been made.  I covered part of my short for a loss, and will add again later.  Earnings lowball estimates saved the day, and most heavily followed earnings plays have gone up after bad earnings.  It looks like the top will take some time, as it often does, so we may have to spend another week or two at these levels to draw in more hedge fund money before the flush out.

The Effect of QE

Based on what happened after QE1 and QE2, traders are salivating over how much the market would go up after QE3.  But you can't give all the credit to QE for rallying the markets in 2009 and 2010.  The market was depressed in both instances, and was ripe to rally on any sign that the economy was stabilizing.  Right now, the market is not depressed, it is only 5% off the highs for the year, and we're at 1350, not 800 or 1050.  Big difference.  And earnings are slowing down, not rising like 2009/2010.  We're in a different point in the economic/investor cycle.  We had the panic in 2009 and the bottoming of the economy, and the natural bounce back from recession.  But now the recovery is 3 years old, and more importantly, the investor cycle is much more complacent than in 2009/2010.  Did we have traders regularly use the term BTFD in 2009 or 2010? 

It is a different animal now, the transformation from bull to bear is occuring before our eyes.

Trend Channel Voodoo

I was looking through some of the messages on the Stocktwits site over the weekend.  In particular, I noticed a lot of technical analysis being done by traders.  To this simpleton, it made no sense.  It was random.  The trend lines, the trend channels, moving average lines, the Fibonacci numbers, etc.  Voodoo.  In particular, I noticed a lot of drawings that were similar.  These guys aren't too imaginative.  They think mostly the same way.  Most of them drew an uptrending trend channel to fit the highs and lows since the June 4 bottom.  It was projecting higher highs and higher lows till we reached 1400.  Probably on June 4, we were in a downtrending trend channel which they probably drew out to the depths of hell.

I will look at charts just to see past prices.  The only technical analysis I believe in is past resistance and support  I only believe in horizontal support and resistance.  Because it is reflection of past support and resistance, where actual emotions were involved, not somebody's wild imagination drawing an uptrend or downtrend line projecting into the future.  I don't have the inclination to draw trendlines or trend channels to predict.

Since technical analysis "seems" scientific and analytical, traders flock to it as if its some roadmap to riches.  It is called technical analysis after all.  It sounds smart. 

For this trader, the fundamentals will always trump the technicals.  European weakness is mostly priced in, but China's crash is still far from being fully priced in and the US market is ignoring everything and hanging sky high above the rest of the world's equities as the global equity safe haven.  If I had a dime for everytime I heard "best house in a bad neighborhood."  How about "most overvalued house in a bad neighborhood"?  The fundamental and sentiment picture could hardly be worse than it is now, with US stock investors clinging to QE3 hopes in the face of the the weakest global economy since 2009.

Unlike QE1 and QE2, when the market was much more cheaply valued and the economy was on an upward trajectory, the market is now much more richly valued with an economy on a downward slide.

QE3 will not save us this time, it will just provide the fuel for a last gasp rally which will be a monumental shorting opportunity.  With the number of fatal blows that the bears took over the past 3 years, I doubt too many bears will be brave enough to seize that opportunity.

ES Lagging Crude

If you just watched crude oil, you would guess that the ES should be around 1360.  Because crude oil has been acting very strong while ES has been going down day after day.  It is unusual because crude oil has been so tightly correlated with the stock market.  This must be the most fearless 6 day decline in history.  It is quite informative to see the rally from 1320 to 1370 be met with a lot of hope, but the decline from 1370 to 1320 has not been met with much despair.  This feels like the early May situation. 

The VIX is too low when the earnings are coming in this weak and the economy is only getting worse.  Expecting a sharp up move in VIX anytime now.

The Red Zone

If you have ever run a long distance race, you know that going too fast will exhaust your endurance and your body will break down and slow you down for the rest of the race. But if you run too slow at the beginning, you are putting yourself too far behind others. You need to run fast enough to keep a good pace, but not so fast that you hit the red zone.

Well, China has been the rabbit, running at a ridiculous and unsustainable pace for the past several years. Now they are in the red zone paying a heavy price. There is too much capacity, too many ghost towns built, too many empty uneconomic buildings. The return on capital for most new construction projects is deeply negative. This has put a huge burden on the Chinese banks who are holding the toxic loans for all these projects. Add in the real estate bubble and you have a disaster. 

A soft landing hard landing debate misses the point. This is a crash coming after a popping of a real estate bubble. It is not a part of the economic cycle. It is a popping of the massive bubble in Chinese centralized planning. The Chinese officials thought that they had solved the economic cycle and could get rid of busts and just keep booming.  Capitalism doesn't work that way, even if its krony capitalism.  We are beginning to see investor nervousness about China, something we haven't seen before, I am seeing more CNBC guests worried about China.   China naysayers like me used to be ridiculed last year for ringing alarm bells, are no longer. There are more joining the China bear camp.   This migration once fully mobilized, will cause a Chinese equity market and real estate panic.  It should happen sometime in the fall, similar to the Euro scare last August, and that will crush commodities and drag down equities with it. 

Bearish.  Earnings will pull down the market.  Stay short.

Hedge Fund Special

Straight up and straight down.  We are down 4 straight days after the mother of all face rippers from 1307 to 1374.  The smart hedge funds know when to pile in and they leave the bag for the latecomers to absorb the risk.  It used to be more halting moves when retail and mutual funds traded a bigger percentage of the total, but now the hedge funds and HFT bots rule the roost.  Fed minutes later today should disappoint, as they were for the meeting when the markets were up, and Fed usually doesn't like to mention QE3 when markets are up. 

Getting Ready for Earnings

There is not much on the calendar other than earnings for the next couple of weeks.  It should be a bearish catalyst as the Q2 numbers begin to show a slowdown, and the outlook should be horrible.  If there is one thing about earnings, the market focuses much more on the outlook than the past quarter.  I can't imagine too many companies with positive outlooks, with the way Europe and China act.  Also do not underestimate the caution that CEOs will take ahead of the fiscal cliff.  That adds more uncertainty to the mix.

If the market wasn't so far above the lows, it wouldn't be such a problem, but we rallied huge off the June bottom, there is a lot of air underneath for disappointment.  Sentiment is rather complacent right now.  Bad earnings outlooks and complacency is a bearish combination.  I added some short yesterday and will add more today. 

QE3 is Coming

The numbers are rigged.  The Fed is the man behind the puppet.  All the data has been massaged to give the Fed an excuse to do QE3.  An under 50 ISM, a slightly below consensus 80K nonfarm payrolls.  Bad Philly Fed number.  Numbers massaged to give room for more QE, but not so bad to make it seem like the economy is falling off a cliff.

The first dip after this strong run should be bought, but I won't touch it.  I will look to short the next rally off this dip.  And that short will be for a longer term trade.  Waiting for the short opportunity, wanting to get in short VERY soon.

Good Jobs = Bad News

The market needs QE3, it is a junkie.  ADP came way above expectations, and nonfarm payrolls will likely at least meet expectations, after underperforming ADP for the last couple of reports.  But this only makes the Fed less likely do to QE3.  Of course, this is assuming that prices stay the same.  If the stock market goes back down near the put strike, 1250, we will get the Fed panicking into QE3.  So higher, we don't get QE3, lower we do.  So we'll probably have to go lower because this market is not self sustaining, it needs QE to sustain higher.  1370-1375 is a strong resistance area, offers great risk reward short. 

Investor Positioning

Last week and this week.  Two tales of news, price, sentiment, and investor positioning. 

Last week:  1) The week starts with relief that the Greece vote had the "good" team win, ended up being a nonevent, relief that a supposed bullet (to me, a rubber bullet, to most others, a silver bullet) was dodged.  ES 1340.  2) More relief that the Fed didn't do nothing (worst case scenario avoided), and gave the market what it wanted, like it usually does, and the market didn't have a sell news reaction.  This much relief opens the door to future angst.  ES 1352.  3)Angst happens.  Philly Fed disappoints.  ES 1343.  Goldman fronts run their short call to cover at lower prices, and the market keeps falling.  Usually the opposite happens with these Goldman calls.  A bearish sign for upcoming days.  ES 1321. 

This week:  1) Angst over the EU summit fearing nothing will be done, market gaps down big on Monday and selloffs intraday.  ES 1308.  2) Two days of low volume bounces as the nervous already sold on Monday, and now the bargain hunters take over.  ES 1326.  3) A return to angst on Thursday because Obamacare was upheld by the courts, viewed as a negative by investors.  ES 1308.  At this point, most investors are resigned to a weak close of the quarter, and heavily positioned in cash.  Merkel cancels press conference fueling rumors of a EU summit deal.  ES goes from 1307 to 1323 in one hour.  4) The details of the deal come out, totally unexpected, ES up to 1340 in overnight session, Europe continues to trade strongly despite monster gap up, ES goes up to 1347 for a monster 24 point gap up at the open.  Shorts cover like crazy, underinvested hedge funds panic buy to keep up with the averages, FOMO takes over, they don't want to miss the train.  The ES choo choo train high on hopium.  Monster moves in crude oil, gold, euro, and a huge squeeze at the close.  ES 1358.  This is not relief, but hope.  Hope that the worst is over and that we'll start a new uptrend with this EU summit news. 

We had a net 6 point move, from ES 1352 to 1358 over 6 trading sessions, and went from angst over the Greek vote, to relief that it didn't bring disaster, to anticipation of Fed action, and delayed disappointment and weak economic data to bring back angst.  Angst goes more extreme with fears of nothing happening at the EU summit, and then Obamacare being upheld increases the fears even further, and then we get the rescue.  This is not relief, but surprise and hope.  Hope that the EU has kicked the can far enough for the market to rally for at least a few weeks, which is all the hedge funds are asking for to keep up with the averages. 

We are back in the hope part of the short term trading cycle.  That is dangerous considering that the rally off the June 4 low is now 4 weeks old.  We are now vulnerable to another intermediate term downtrend like May 1 to June 4.  This EU deal has brought on a lot of hope, that Germany will bailout the southern Europeans.  But the global economy is too weak to have a sustained rally from these levels.  Crude oil and copper tells me that clearly.  You can get jumpy hedge fund money to buy here, but that's about it.

Only Looking Short

It is now TOO DANGEROUS to play long.  At 1350, you are playing with fire on the long side.  No, it is more like lighting a Roman Candle backwards, with the wick pointed at you.  I am not expecting an immediate splash downward, but we have pretty much reached the price objective.  Upside is very limited here, we could maybe squeeze another 10 points to 1370.  The time objective has yet to be met, but that will likely be met with low volume narrow range trading next week.

I am stalking a short position, perhaps even starting today if we get to 1353.  More likely, I will start a short position next week.  This Euro news will calm the bond markets, but it won't calm the European economy.  Only way that happens is if Europe takes a page from Obama/Bernanke 101: a tax cut/pork fiscal combo with QE.  We are far away from that and need to see more dead bodies (perhaps Merkel's?) before we get those other goodies.

Crude Oil Canary

Crude oil does not lie.  It is telling a story of a sharp drop in industrial demand.  If you are just looking at the change in demand, the drop coming from Europe and China are alarming.  Brent crude oil is trading just above $90, and WTI is now below $80.  This is 2010 territory.  Back then, the S&P traded in a range of 1010 to 1255.  The slowdown in China is being underestimated amidst the onslaught of European headlines.  But China is trading worse than Europe.  Europe is mostly priced in, but China is not.  There is still hot money in China, and China will not bottom until that hot money leaves.  Still several months away.

Overnight we got the surprise move from the EU summit, agreeing to directly recapitalize banks, which is just semantics, because you either give it to the governments to give to the banks, or just give it to the banks.  In the end, the banks get the capital, which is what matters.  So this is nothing.  The continuing of the bond buying of Italy and Spain is somewhat significant, but just a continuation of what the ECB has been doing, just onto a difference balance sheet. 

I see a sell the news reaction for the first half of the day, but I don't see much downside, perhaps down to 1325-1327.   Next week, we can continue rallying off this into the nonfarm payrolls next Friday, but beyond that, is asking for a lot from a weak market.  Still waiting for the 1350-1360 zone to short, should get there next week. 

A Grind

The emotion has been mostly sucked out of this market.  The volatility is quite muted considering that the general view is sort of bearish.  I agree that the market will eventually head lower but we will likely have further countrend action in the coming days.  I am still leaning bullish, but less so than Monday.  I am short term bullish, intermediate term bearish.  Which is kind of tricky to play, so I am waiting for the right setups. 

I am hoping for the market to get back up to 1350-1360 zone to put on shorts.  Perhaps we can do that next week.  Otherwise, I am looking to buy dips for short term quick trades for the next few days only.  I will not go long after the first week of July.  I think this market is set up to go back down again eventually.

Range Bound

Not expecting another big selloff here.  The EU summit will result in nothing as usual, and expectations are low as usual. 

The low that we hit on June 4 was climactic, and will be able to keep this market above 1295 for the next couple of weeks.  We are pulling back to work off the overbought reading since the rally off the bottom.  We should grind higher from today for the remainder of the week.  I am leaning bullish.

Nothing Day

The shorts aren't going to push their luck today ahead of the weekend.  I am expecting a rally in the second half of the day. 

It's a Bear

The tell was that even a Goldman pump and dump play where they are covering their shorts after making a short S&P call couldn't lift this market at all.  This after yesterday's QE3 bullish call from Goldman.  You can't get any scummier than that.

A very weak market, and I fully expect us to go down to 1290 on this move, which will likely get bought for another oversold bounce.  Expecting 1290 by next week.

Big Picture View

Let's step back from the day to day action.  It is now a poor daytrader's market as the volatility is dying out.  From a fundamental view, equities are a sell.  The global economy is slowing rapidly and this time, it doesn't look like the US will escape.  Aside from Europe, you have China in a slow motion crash (just look at crude oil) and the upcoming fiscal cliff in the U.S. 

It seems like investors are clinging on to QE3 hopes as a reason to buy stocks.  Otherwise, there are no other compelling reasons.  At 1350, the market is not cheap.  I would say its expensive, considering the portion of the cycle that we're at.  It is not like the late 70s or early 80s, when stocks were dirt cheap.  We are nowhere near that valuation level.  It makes us vulnerable to deep corrections and bear markets when the economy weakens.  Just watching and eyeing a possible short on Friday or Monday.

Rerisking

The Street got very bearish in May and early June, and a lot of traders went to cash.  That cash is being deployed, and the wave should continue for another 2-3 weeks.  The long side is the side to be on when this rerisking happens.  Just don't overstay it.  It will get hairy again after this reprieve.  Not much upside, but we ain't going down much either.

Fed will give the market what it wants, which is a Twist or whatever and save their QE3 when the market is in the 1220-1260 range.  Remember, Banana Ben is a stock jockey.  He will not fire any bazookas when we are at 1350.  I would buy any dips of 10-15 points for rest of the week. 

Getting In

Those on the sidelines are starting to get off.  The early birds got the worm, but we're still in the middle innings of this move.  Time wise, not price wise.  We are not going to 1400 on this upleg.  Most of the price gains have been made, but it doesn't mean we go right back down.  We should stay above ES 1325 and make our way towards 1360 eventually.  This rally likely has at least another 2-3 weeks left in it, most of it should be consolidation between 1325 and 1360.  There will be more short covering ahead of the FOMC announcement tomorrow. 

Triage

In the field of battle, you have soldiers that get wounded and killed.  With limited resources, you have to decide who to treat among the wounded.  Those that just have minor cuts and bruises receive no treatment (France).  Those that have deep cuts and broken bones receive treatment (Italy).  Those that have shrapnel all over their organs, broken bones, massive internal hemorraging and blood loss are left to die (PIGS).  You don't try to save everybody.  In order to maintain the whole, you need to get rid of the dying that weighs down everyone else. 

Europe is still in denial.  They are still trying to keep Greece in the Eurozone.  It is a sign of the times.  Short term (and misconceived) thinking.  The fear that Grexit would collapse the Eurozone, keeps Europe from doing the right thing.  Getting rid of Greece, Portugal, Ireland, and Spain.  If they are having this hard of a time getting rid of little old Greece, imagine them trying to get rid of Spain.  They won't.  This Eurozone crisis will keep dragging on because of this short term thinking of saving everyone.  The main effect of this bailout everyone policy is to drag down the value of the euro.

Europe has to let PIGS default, save the remaining bailout money to save Italy.  Forget about Spain, Portugal, Ireland, and Greece.  Let them default, leave the Eurozone,  devalue their currency, and move on.  They are uncompetitive with the euro as their currency, unless the PIGS accept wage/asset deflation, which is about as likely as hell freezing over.   Trillions of capital that will be used to save PIGS bond holders (not the country) tells you all that you need to know.  The capital markets have politicians at their whim and ALWAYS get what they want.

P.S. Just watching and waiting, not much of an edge either way today.  I don't expect much in the way of opportunities for the next few days.  Probably best to just take a BTFD strategy.

Squeeze Ahead of the Event

Those nervous about those Greece elections need to turn off their cable sets and stop watching CNBC.  The amateur shorts got nailed shorting ahead of uncertainty.  You either go to cash or buy ahead of events.  You never short them.  It is part of my events playbook which keeps me away from the short side ahead of these anticipated/feared events. 

Coordinated Central Bank Action

Yesterday's news reminded me of Y2K.  There was all this fear about possible catastrophe over some computer glitch going from 1999 to 2000 and the Fed pumped a ton of liquidity ahead of it.  Greece elections is like Y2K.  It is fundamentally meaningless, but it stirs up intense fear among the investor community.  Somehow Greece exiting will cause contagion.  I think it would do the opposite.  It would strengthen the remaining members because there is no longer precious capital going down a gaping hole.  I think the market rallies on that news.  If Greece stays, there is always the possibility and uncertainty of exit.  If they leave, they are forgotten forever and the market can move on to more relevant things. 

Market is addicted to free money.  Whenever they get signs of possible coordinated central bank activity, they love it.  Where is the pain point which leads to ECB/European/Fed bailouts?  Do we measure it with the Eurostoxx index, Spanish bond yields, or the S&P?  That is something to think about.  I definitely don't see any action at these price levels.

It seems like Spanish/Italian bond yields will be the measuring stick.  If the Spain bond yields go towards 8-9%, then we probably will get action.  The equity market won't/isn't panicking over 7%.  So we'll have to go to higher yields before we get action.  Remember, only when the market starts to panic do the central bank bazookas come out.  The Spain bailout was just a rifle shot.

Expecting selling in the first half of the day, but not that much conviction.

No Shorting

The market is having a hard time going down.  It is a struggle to go down 1%.  It is acting like a beach ball in the ocean.  You can't keep it down.  This is the opposite of the action we saw in May.  The bears had their shot on Tuesday and Wedneday to take this thing down below 1300 and failed miserably.  I am getting more constructive and a down day today will encourage me to get long.  I am watching and waiting for the buy opportunity. 

Micro Trading

If there is one thing that I should have learned from past mistakes, is to position yourself so that your trades do not conflict with what you want to hold for the next several days.  For example, let's say one is short from Monday at the open at 1329.  If the prices comes down to 1300 on Tuesday, and I want to cover at 1295, I should be getting ready to cover on any signs of a reversal.  I.e., heavier volume, volume spin (price going nowhere but volume staying high), or refusal to go down much on bad news (Spain 10 yr yields shooting higher).

Especially because I thought the market would eventually go back up.  Yesterday, I was getting more constructive on the long side after the Spain bailout and because of next week's FOMC meeting.   So I was not a comfortable short.  I was a just a renter. 

If I am short and we are close to my price target, it is better to cover then to try to squeeze out a few extra points from a predetermined price target.   Same goes for the long side.  But I have noticed that the long side gives you much more time to get out profitably than the short side.  In other words, the market spends more time forming tops than forming bottoms. 

Bearish for the day, expecting weak action. 

Schizophrenic

On Sunday night, ESU hit 1342 and there was excitement about the big rally coming.  By the time we got to the US open, it was at 1329.  By the futures close at 4:15 ET, it was 1300.  We went from excitement to gloom in less than 24 hours.  That is not common.  Usually it takes a few days to go from excitement to gloom.  This behavior is not sustainable.  This kind of trading signals indecision and usually leads to a trend change.  Since the trend has been down, the probabilities tell me we are going higher in the next few weeks.  I think we make a low this week between 1290 and 1300 and that will drive us to 1360 by July. 

On to the Next Rumor

It's a funny thing, but it seems almost all rumors are positive.  I rarely hear negative rumors these days.  The negative news never gets rumored, it just comes out.   If you wait for the news to act, you have to trade backward (go short on positive news, long on negative news).  If you can anticipate the rumor/news, you can trade forward.  If you trade straight forward(going long on positive news, going short on negative news), you will probably lose money.

Smart Money is Selling

The rally we had last week was not based on Fed QE3 hopes.  It was based on this Spanish bailout.  We went up 60 handles last week off the lows based on these rumors.   Now we are up on strong resistance at SPX 1340.  The market is overextended.  We have the Greece elections next weekend.   Very few funds will want to buy up 5% off last week lows ahead of the Greek elections.  The only buying going on here is dumb money and weak shorts.  Already we are down more than 10 points off the overnight highs.  I am expecting at least a test of SPX 1300 later this week. 

Bailout World

Traders are exceedingly short term focused, seeking catalysts in band aid solutions that don't get to the core of the problems.  They want quick face ripping rallies off these band aids.  They could care less what happens in 3 months.  This coming Spain bank bailout is one such example.  Are we supposed to believe that the eurozone problems will be solved with these kind of bailouts?

One would have to have lived in a cave the last 4 years  to not realize that insolvent banks WILL get bailed out eventually.  They always do.  Whether its US or Europe.  The Chinese banks are probably in the worst shape and they too will eventually get bailed out, either publically or by stealth.

Politicians and central banks will never bite the bullet.  The easiest thing to do is overspend and print money to spread out the pain among the rest of the paper currency holders.  Remember this during the darkest hours, they will print loads of money.  So we will not see another 2008.  Maybe mini 2008s, like last fall, but no big ones.  Wall St. has learned its lesson.  Buy the crashes because they precede torrents of liquidity.  Paradoxically, the worse the crisis, the more money that will be printed and the more the markets will rally.  It is like a coiled spring, the more you press down on it, the more potential energy that builds.

All this will lead to a perpetual state of purgatory.  In order to create economic booms, you need to suppress demand and let it build up for it to explode into economic growth in the future.  But with all this money printing, demand is never sufficiently suppressed during the downturns to have explosive expansions.  The recessions don't last long enough for demand to get pent up.  The expansions are weak, unless force fed huge amounts of pork or bubbles built.  All that is left is higher nominal prices that feels like the economy is doing ok looking at asset markets, even when the average person doesn't feel it.

If you have enough productivity and efficiency growth, the pain is invisible.  If you don't, the pain is palpable.  With the kind of fiscal and monetary policy run by most of the world, and continuous population growth, the extra money ends up chasing the same number of goods.  Leading to high inflation.  The only way to prevent high inflation is increase productivity or find more resources to reduce commodity costs.  Well, we are at peak oil so there goes that resources boom.  Shale gas is a short term boost in energy supplies, which fades fast once the wells peter out, which is quicker than conventional gas wells.  Make more with less.  But with most technologies maturing, and few game changers like the microprocessor or the internet on the horizon, there will be minimal productivity gains in the near future.

The end game will be a loss of faith in fiat currencies and a drive to protect from inflation by either buying stocks, commodities, or real estate.  The poor will not be able to protect themselves, unable to afford stores of wealth.  The rich will do well.  More inflation means higher nominal prices which drive the animal spirits until the imbalances get so great that you get another crash.  Rinse and repeat.

The New Widow Maker

Move over Nat Gas.  You have a rival now.  For the title of widow maker.  Gold.  On Friday, we had a huge rip higher on QE3 hopes on the bad jobs number.  And then a key reversal day Wednesday and a crash lower yesterday on dashed QE3 hopes and the unwinding of the fear trade.  Gold needs an inflationary environment/weak dollar to maintain a long term uptrend.  We had that up to 2011 before China hit the wall and Europe entered into a deep recession.  It is now a disinflationary environment.  Sure, gold can have brief sharp rallies based on fear, but those kind of rallies don't last for long.  You need inflation, not fear to have a strong sustainable gold rally.  I like gold in the long term over the next 2 to 3 years, but that is a long time away.  I can't be bullish on gold here until we see China bottom out and the ES go much lower.  Both events are likely several months away.

 Just watching for now, the S&P could go either way. 

Did Chinese Insiders Buy Stocks Ahead of News?

Lowering interest rates after a popping of a real estate bubble will have minimal effects.  The Chinese are all in on real estate, they view it as their sole source of protection against inflation.  You see, the Chinese stock market is rigged against the outsider, the insiders are so corrupt that they commit outright fraud or skim off huge chunks of profits into their pockets. 

I would not be surprised to find out that Chinese government insiders loaded up on stocks earlier this week ahead of insider info on the coming rate cut news to dump for a profit tomorrow.  It is that corrupt over there. 

Europe has been the story up to now, China will be the story for the next year.  It should have minimal effects on US small caps, but will affect the commodity producers and a few select large caps with large China exposure.  Japan, Korea, and Taiwan will be the hardest hit.

I am expecting a gap and crap today, after the huge rally yesterday, but we will likely go up in the final hour of the day since no one wants to miss the overnight rallies or be caught short.

P.S. - I will make the blog invite only on Monday.  If you sign up with a blogger account, I will add that email.