Flooding the Market

You remember those video games with the secret code to get unlimited lives?   This market is using a cheat code.  Its unlimited liquidity.  If you need it, you get it.  Even if you don't need it, as seen by the $800+ B in reverse repos, you get it.  The Democrats are apparently working on an infrastructure bill, using reconciliation, to be able to pass unlimited pork with 50 votes.  

There has never been such an expansionary fiscal and monetary policy by a nation in modern history.  Even World War II spending pales in comparison to the trillion dollar spending bills + bazooka QE combo.   The market distortions are not only hitting stocks, everyone's favorite asset class, but its hitting bonds.  10 year yields from July 1 to July 8 went from 1.48% to 1.25% on a short squeeze of epic proportions, as the stock market basically went nowhere, with a very brief dip that was bought aggressively by the ravenous dip buyers.  

There is so much excess cash flowing out there that any minor dips are quickly bought up.  This reinforces equity investors to just hang on, and not sell weakness.  Almost every time that stock investors have sold weakness, they have made a mistake.  Eventually, they learn their lesson.  If fewer and fewer investors sell weakness, then the market can't really go down.  And over the last 15 months, bullish and optimistic investors have made most of the money, so the ones that have the most money at the current time are the ones that have been bullish, and continue to be bullish.  

The money is not only concentrating towards the wealthy with big stock portfolios, but its concentrating even more among the most bullish of the wealthy, who have been buying the dips and continue to add to their stock holdings.  And they are getting ample support from the Fed.  

You can't fight the money.  If you are going to be short, you have to be selective, choosing the stocks where retail investors are oversaturated, and are stuck holding the bag.  The meme stocks like AMC, SPCE, GME, CLOV, WISH have rolled over and retail traders are notoriously poor at cutting losses, which means these turds, which have no fundamental value, will keep going down until most of these bagholders can't take it anymore and finally sell.  

The Robin Hood crowd has gotten too greedy.  They should have been happy with what they made on GME and AMC, but they tried to run their game on other stocks like CLOV, WISH, and SPCE and it never gained critical mass.  There can only be so many meme stocks because these Reddit traders have a finite amount of capital.  And from the looks of the stock charts that I see where retail is crowded in, that capital has been shrinking, while the $SPX keeps going higher.  

Even though I expect the SPX to go much higher this year, in the short term, it just looks to be too much, too fast.  But I definitely wouldn't fade it.  There hasn't been a lot of call volume lately, so the put/call ratio is not at extreme lows that you often see at the tops.  So even if it does pullback, it probably is like what you saw last week, 1 or 2 down days, and then a surge back towards all time highs.  

CPI number comes out today, I don't think its going to be a market mover for the SPX, but after the 2 day selloff in Treasuries, it wouldn't surprise me if bond traders buy after the number comes out.