Whenever you play games like Super Mario Bros. or the like, there is a boss at the end of the level. The first few levels, the boss is easy to kill, or has an obvious fatal flaw. But when you get to the final boss, there are no obvious flaws and you have to be near perfect to beat him.
Well the S&P 500 is the final boss for the shorts. It has no obvious flaws. It is nearly flawless. The Shanghai Composite is Glass Joe, the Eurostoxx is Soda Popinski, and S&P 500 is Mike Tyson.
We have another gap up today, with investors seeing everything they want from an ECB that will cut rates and do a QE, no tape bombs from China, and an S&P that refuses to go down despite Russell and Nasdaq getting pounded. The final boss doesn't go down easily. It will take a huge effort by the bears to take this market down. It is foolish to short the S&P for more than a few hours. It just doesn't pay.
By the way, 4 weeks have passed since the April bottom. The grace period is mostly done. The market will have to go up on its own natural strength, not the strength of covering shorts or underinvested managers. Unfortunately for shorts, there seems to be plenty of natural strength in the S&P.
We have the Fed trade in motion over the last month, stocks up, bonds up, and commodities up. Tapering is a nonfactor. Market looks indestructible. Too smart to go long, too scared to go short.
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6 comments:
Looks like we are breaking out.
See my tweet on Twitter earlier in the day. Probably a false breakout here. Could last till opex on Friday.
Does it look like head & shoulders pattern? Thx.
I don't follow chart patterns, they don't help me predict.
If it lasts a while we could possibly go quite high. Where do you think it could go up to and what makes you think it's only a false breakout?
I don't know for sure, this is a guessing game, isn't it? haha. Just gut feel, and the amount of time we were stuck between 1860 and 1890 tells me that is where market participants feel comfortable buying and selling.
I just don't see enough fuel for a sustained move higher, there doesn't seem to be too many underinvested longs now. Fund managers don't want to get fired for underperforming their peers, so they mostly stay long.
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