Not Forcing It

In a bull market you don't have many trading opportunities.  Volatility is low and the market usually moves in just one direction.  I can sense a reluctance to pile in and push the market above the 2011 highs of SPX 1370, especially after a straight up move of 120 points in less than 2 months.  We may not do much for the next couple of weeks.  But this is not like 2011.  The exuberance at 1370 last year is absent at 1370 this year.  So we can surely dip, but it will be mild, and a pause that refreshes, to springboard the market to 1450-1500 by year end. 

In the meantime, I am on the sidelines waiting for a dip to buy.  Zzzzzzzzzzzzzzzzz.

Killing Em with Inflation

The silent killer is inflation.  You don't notice it as much because wages are increasing but in the end, the money doesn't buy as much.  You have a gigantic federal deficit thanks to never ending tax cuts, zero interest rate policy with in your face monetization of debt via QE.  So no wonder there seems to be an endless bid to this market.

I could show you a good time too if you pumped me up with $1.5 trillion every year.  What Banana Ben has done is tell savers to bite the bullet so the economy can stay afloat and stock markets can rise.  Pretend like there is no inflation and keep QE going till they bleed dollars out of their eyes.  Shorting in this environment is a fool's game.  You just buy the dips because this grand experiment, which the ECB is also hell bent on following, will just create a rising tide of higher inflation and instability.  It will get interesting over the next couple of years when you get populist complaints about high food and gas prices falling on deaf ears at the central banks around the world.  The 99% with no equities or commodities investments will be crying while the 1% will be laughing as the S&P, crude oil, and gold hit new all time highs. 

Now What

The market has a memory.  We nearly reached the 2011 ES highs around 1370 in the overnight market and have backed off.  The Greeks got bailed out again.  The money coming from the ECB has done its job.  In a normal market, we should pullback, but there is so much money in the system that any pullback will be short and over quickly. 

We have another liquidity induced rally like we did with QE2.  The capitalist boom and bust cycle have been manipulated with massive amounts of money being used to cover up big holes in federal and household debt.  The only side effects are $4 gasoline and stubborn inflation even with high unemployment.  The market never crashes because of inflation.  The bull market will continue and those fighting Banana Ben will have his helicopter wings chopping at their necks. 

Waiting For the Pullback

Like everyone else, I am waiting for the pullback to buy.  This will make the pullbacks very shallow for the next several weeks.  After we've had a few shallow pullbacks, the market will be softened up for the big whack lower.  That shouldn't happen for some time now because we still have a bunch of sideline money waiting to buy on a dip.  Europe is going to get papered over by the ECB and that only leaves China as the catalyst for a big drop this year.  I expect that to happen within 6 months as the Chinese real estate bubble implosion takes down the economy with it. 

For now, there isn't much to do but wait for the pullback to buy.  Even if you buy early, the buy side is always more forgiving, it ALWAYS goes back up.  But no guarantee that it goes back down if you sell early (just ask the shorters last fall in the 1100s and 1200s.).

Strong Resistance

There is a lot of resistance at this 1350 level, which is where we failed to break out last year.  The market is also up 90 points in 40 days.  So we are a bit overextended.  We will likely be range bound between 1300 to 1370 for the next couple of months.  I prefer to be a buyer of dips rather than a seller of strength.  Really not a good trading market, so I wait for good spots to get in or do nothing.  Greece news is brought up because there isn't anything else to talk about, it really doesn't matter to the US market anymore.  We're past that chapter.

Buy the Dips

We'll have 1 or 2 down days and we'll go right back up. You have to be a buyer.  It is a bull market.  Shorting is a sucker's game right now, in ES anyway.  If you want to go short, short a weaker market.  Why short the strongest market?  Likewise, if you want to go long, go long the strongest market.  ES is one of the strongest markets. 

There is strong resistance at 1345 so I think we're going to have to bide time at these levels, but I don't see us going below 1300 anytime soon.

QE3?

We have one strong jobs number and we've got a lot of traders expecting the Fed to delay or even not do QE3.  I strongly disagree.  If there is one thing that you cannot do is underestimate the desire of Bernanke to juice financial markets.  He's not done yet.  Not by a long shot.  Unless you see unemployment number back in the 6-7% range, you will not see this money printer stop.  They are not satisfied with S&P 1330.  They want 1500 and higher.  Only when S&P goes to new all time highs will they stop printing money.  Gold will go much higher.  Dollar will go much lower.  Stocks will go much higher.  Book these numbers for 2013:  S&P 1500, Gold 2200, and Oil $120 (NYMEX). 

Like 2006

After a flat 2005, traders weren't too excited about 2006, but what we had was a steady rally with one dip in the spring and then a continuation into higher highs and a big up year.  I see the same thing happening in 2012.  Volatility will die out, we'll have our annual big dip which scares the traders, form a bottom, and it will be off to the races.  I expect us to hit the same levels as the end of 2006, 1440 by the end of the year.  That would be the bounce top off the January 2008/March 2008 lows we saw in May 2008. 

Quick Short Trade

There is an opportunity for a high percentage short trade here, the market is gapping up 1% on a good nonfarm payrolls number.  We are already a bit overextended, I don't this gap holds with the big run up over the past month.  I would only look for a day trade, nothing more.  Also we're hitting close to strong resistance at 1340-1350.