SPX Beach Ball

You can't keep the sucker down.  Trying to keep the stock market down is like trying to keep a beach ball under water.  You had a selloff day yesterday, on no news, and then Yellen comes out and talks about overheating and rate hikes, and there you go, your mini me panic bottom at SPX 4130, and grind higher to close with just a small loss and then a decent gap up for the FU to the short sellers.

Hedge funds are selling, as shown by the BofA hedge fund client flows data. 

Surprising to see hedge funds selling so much. pic.twitter.com/A8Ix1ygffl

— Market Owl (@MarketOwls) May 5, 2021

 

I watch CNBC, I listen to podcasts, there are still a lot of people looking for that pullback.  And now the hedge fund data provides the reasoning behind the anecdotes.  The hedge funds have been selling the rally.  

So who's buying?   Its all the stimulus money.  That's the only logical answer.  We are talking about trillions of dollars printed out of thin air that is looking for a home.  $4 trillion is a lot of money!  Liquidity is overflowing, and Powell has his head stuck in the sand, in denial, trying not to rock the boat and crash this market so he can get reappointed.  The Fed is way behind and clueless, as usual. 

Since bonds are out of favor, that means funds going into money markets, stocks, and real estate.  And stocks and real estate are on fire.  Its just money that is out there, excess capital, looking for a place to invest.  This capital doesn't care if they are buying at all time high valuations, they want to invest, no matter what.  

The devaluation of the dollar from all this money printing is pushing the commodities index to the highest level since 2011.  Inflation is back with a vengeance, and it will be sticky, just because of the overflowing liquidity, rising wages, and lack of productivity gains. 

Shorting is just too tough.  You can't catch more than small pullbacks in this market.  Its still a BTFD market.  Amazing, considering we are on year 13 of the bull cycle since the bottom in 2009. 

The charts are still very overextended, as the SPX is way above its 100 and 200 day moving averages.  There is complacency, but top picking is hard.  Its actually easier to pick bottoms, even though it feels scarier.  

I still have a small short position, but definitely not going to be increasing my position, and will look to exit on the next pullback. Its still much better to buy dips than it is to sell rallies.  I just can't make myself buy this market when its SO overextended.