Relentless Buying

The market was looking for any excuse to rally coming off of the December 24 capitulation, and a super dovish Powell has done the job.  The rally looks like it is near the end point here, as we approach the 200 day moving average at SPX 2740, as there is trade deal optimism and now assurances from the Fed that they will be "patient". 

It has been 6 weeks since we've made the bottom, and that is usually when the FOMO and short squeeze fuel runs out and you start getting more choppy trading action.  The market doesn't trade like it used to, when there was less systemized trading and more 2 way trade in uptrends and downtrends from active fund managers. 

With the decline in assets of the active managers, passive management has taken over.  Passive investing flows take away a lot of the short term counter trend moves and you get huge, one way moves both up and down.  How else can you explain the 10 straight up days from 3:15 PM to the close?  Those are passive ETF money flows getting put to work. 

I have still not put on a short position, as I was waiting for more definitive news on the US/China trade deal.  It will get done, and almost everyone thinks so, which will make it an obvious buy the rumor, sell the fact event.  The current prices around 2730 are a good place to put on initial short positions, with intent to add more short if it goes higher.  I have been patient putting on shorts, just because the up trend has been so strong and the stock buybacks are coming into the market in full force now as the earnings blackout period ended for most companies this week. 

The US stock market definitely doesn't die easily, and it will probably take at least a month of choppy trade to form a top.  With the lack of earnings growth, the fundamentals will be working against the market, especially at these levels.  When it does go back to a downtrend again, it will get nasty.