Buy This Dip

Getting long this dip, expecting more upside after the long Easter weekend.  If you don't have bad news, you don't get a buyable pullback.   Europeans are scarecrows, they get scared easily, and are dumping their stocks wholesale ahead of the Easter weekend.  Remember, they have Friday and Monday off.  They want to lighten up on risk, even at firesale prices, ahead of the long weekend.  Spain has spooked them.  We are getting the bad news (Fed minutes/no QE3, Spanish bond weakness) and you have to buy the dip.  It works till it doesn't.  I am betting that it works for a while longer because of the strength of the uptrend.  It is like late 2009, this strength.  2009 shook the tree and took out weak investors.  2011 did the same thing.  You had to buy pullbacks in November/December 2009.  If you were early, you could just ride it out because it went higher eventually.  Same thing here.

Getting Dangerous

I am still constructive on this market, and expect all dips to be buying opportunities.  But the easy dip buying money is gone.  The dips going forward will be trickier, probably deeper, and won't bounce back so quickly.  The market is getting saturated.  The longs have been gradually adding exposure and eventually that will weigh heavily on the market when the potential investor supply dries out.  I am expecting the sell in May and go away crowd jumping the gun and selling this month.  I am already looking forward to the FOMC meeting three weeks away, on April 25.  I expect nothing from Banana Ben and that should disappoint the crowd.   That could be a catalyst for longs to capitulate and form a bottom for us to run higher into the summer.

Dip Buyers vs. Scarecrows

Right now there is a battle going on in this market.  We have a large group of potential buyers waiting for a dip to buy stocks or cover shorts.  The smaller group are those that have gotten in reluctantly into this market following the trend, without much conviction.  They will sell for quick gains or cut their losses quickly.  These two will be battling it out over the coming weeks, the dip buyers prevent the market from going down much, but the scarecrows don't want to chase this market higher and are quick to take profits.  So we're at a stalemate, and I expect it to continue for the next 2 weeks, trading in a tight range.  I would not be surprised to see this market trade in a 30 point range over the next 2 weeks, not 2 days.

Nat Gas Ginsu

Early in my trading career, I had a fascination with buying stocks in huge downtrends hoping for a bounce.   If you liked it at $2.50, you'll love it at $2.  I quickly realized it was not the right strategy for me and I seized looking at the percentage losers list to find buy candidates.  Individual stocks have a strong tendency to trend, especially when they have been going down for a long time.

But, I make exceptions to this in the case of commodities.  It is about that time. Time to bring out the Kevlar gloves to catch that knife.  I am bearish on natural gas but short term patterns are coming into play here setting up a huge dead cat bounce.  We have a capitulation chart pattern where the NG May 12 contract previoius support at $2.30 held for several weeks, consolidating the down move, and then support gets broken in a big capitulation move lower, usually on bad news.  We got the bad news with the bad inventory report, and with it being the end of the quarter last week, you saw a lot of forced selling artificially deflating prices.  This presents an opportunity to buy the falling knife for a swing trade.  Natural gas could reach $2.60 within 2 weeks.

 

Another Dip

Another Buying Opportunity.  We aren't going much lower.  We have a new month coming soon and institutional money will pile in on the first trading day of the month like clockwork.  Buy it before it bounces back up.  It will bounce soon.

Banana Ben is a Broken Record

The market did not go up because he will do QE3 even with improving economic numbers.  That is a given, and it surprises me to see people surprised by this fact.  He says the same thing over and over, and people act like its something new when he says the same thing. The market went up because you had a selloff late last week, the market was coiled and ready to rocket back up on anything.  That's how bullish this ES is.  Corrections last 1 or 2 days, max.  We are up 160 points in less than 3 months.  That's over 50% annualized!

That being said, I can feel this market is losing energy.  Kind of absurd to say when we are at new highs, and corrections last 1 or 2 days.  But the fact that we are getting corrections more frequently is a change of character.  And we are up a lot in a short period of time.  But no, I won't be shorting American stocks when I think we are ready to go down.  Instead, I will be shorting foreign stocks or ETFs.

Goldman Scams

DJ UPDATE: Goldman Sachs Still Sees Value In Gold; Maintains Long Position

Feb 22, 2012 (Dow Jones Commodities News via Comtex) -- -- Goldman Sachs still sees value opportunity in gold, despite 2012 price gains Gold was at $1755 on Feb 22, now its at $1655, one month later. Stocks offer best opportunity in a lifetime: Goldman Sachs Published on Thu, Mar 22, 2012 at 08:12 Now Goldman comes out with another buying opportunity of a lifetime call, AT THE TOP.  Buy Equities!!  Classic Goldman Scams.  Always know that they are doing the opposite of what they say.  Always. I see very little upside over the next 2 months in US stocks.  This Goldman call only strengthens my conviction.  But, I don't see us falling much at all, so expect sleepy trading in a tight range. P.S. - There are many more examples of Goldman coming out after a huge rally in some stock/index/commodity, and screaming buy.  Invariably followed almost immediately by a sharp drop.  Crude oil in summer of 2008, Euro in the spring of 2010, etc.  The list is numerous.

Mass Media Always Late

The stories coming from the media now about the China slowdown is just another case of the media reporting the scene of the crime, way after it has happened.  This slowdown has been going on for a year now, and yes, it has gained momentum, but the signs were all there.  It takes no genius to look at the symptoms.  Vast underperformance of the Shanghai Composite relative to other worldwide equity indices since 2010.  Weakness in commodity exporting country equities such as Brazil and Australia.  Real estate bubble popping last year, with dumb money rioting in front of real estate brokerages about buying at the top.  The funny thing is that Chinese weakness has the least effect on the U.S., the strongest equity market in the world. 

This is one of the times where you shouldn't fade the news.  I think China is screwed and the only rallies you will see will be induced by lowering of rates and those will be temporary.  Eventually, even China will have to do QE.  It is a QE world, and China will not be immune from it.

Stop Worrying

The water is fine.  Last year is history.  Those hoping for another collapse to buy into will be waiting for a long time.  The game is now rigged.  It is no longer like the old days when the U.S. was on a gold standard and money supply was constrained.  There are no constraints on money.  Anywhere.  Not in America, not in Europe, and soon to be not in Asia (China).

Back in the early 1900s, in Jesse Livermore's day, the supply of money was determined by the amount of gold.  Well, that kept a lid on excessive money supply growth and you had brutal bear markets that lasted years and years.  Those days are history.  Now your lucky to get a bear market that lasts more than 6 months.

Money is now printed at will.  It can only lead to one type of market in the long run:  an up market.  Europe has caved in to the market's tantrums and it is now following the U.S.'s course, without the fiscal stimulus.  This will only lead to money pouring into risk assets.  It will only briefly be interrupted by news headlines.  The trend of money creation is strongly up.  Don't fight it over the long term.  If you are going to short, you have to play for quick hits, there are no bear market stories under these conditions.  Maybe if we get to ridiculous high valuations, but not at these valuations.

The Train Already Left

The market has done its best to frustrate the traders this year.  Those looking for a correction to get on board have had very little opportunity.  The skeptics trying to call a top have been grounded to dust.  I am not a fan of bull markets because of the lack of volatility.  When there is little volatility, you have to seek it out in other markets or just wait it out.  So I have done much less trading.  Sometimes not losing is a form of winning.  We are building up for one 8-10% correction this year.  It looks like it will happen in the summer, because I just don't see us going more than 9 months without a sizeable correction (last one was in November). 

One very significant sign of US stock market strength is the ability to rise along with the dollar, this also happened in early 2011.  We kept grinding higher for another 4 months.  And I would say this current market is much stronger than the one in 2011.  So a strong dollar and a strong stock market means we aren't going down for a while.  Prepare to buy more small dips in the spring.  If you wait for a big one, you'll be left grabbing air.

Dips Don't Last

You had your chance to get long in the middle of the week, with the mini panic over China.  We are already back to pre-selloff levels.  It took all of 2 days.  Even with a stronger dollar, this market doesn't quit.  It has diverged from the weak dollar, up stock market relationship.  This market goes up, weak dollar or strong dollar.  A ridiculously bullish market.  Shorting is for masochists right now. 

CU at 1370

By next week, we should be knocking back on that door: 1370.  It is a stairway to heaven market.  China growth scare (what idiot believes the Chinese officials for one second?), some lame excuse to sell out of Europe, and fears that Banana Ben has suddenly gotten tough and won't do QE3 have all contributed to this dip.  By next week they will be forgotten and those that sold on this dip will be pounding sand when we go back to new highs.

Today is a Buying Opportunity

Don't let it pass you by.  In strong bull markets, the dips don't last long.  The S&P is the strongest market in the world.  Don't let the bears scare you on these dips.  You have to utilize days like today to get long.  We'll be higher next week. 

Buy these Dips

I know its just 1 percent, but you ain't gonna get much more than that, anyway, it will go back to retest the high and move to higher levels.  Still no sense of urgency by the crowd to get in, just no shorts in sight.  They have been incinerated for the 101st time since 2009.  We got nonfarm payrolls on Friday, I am sure the fund managers will want to up equity exposure before it is released.  Hedge funds still underinvested, they have been since the summer of last year. 

Commodities Getting Shaky

Crude oil and gold have been outperformers this year but the resistance to plow higher is growing.  Yesterday was just a stunning drop in gold which came out of nowhere after rather nonvolatile conditions for the past several weeks.  And crude oil is having a hard time keeping up with the stock market, and it has just been consolidating despite Iran.  In the end, the S&P just keeps chugging along, steady and with dips being bought aggressively.  We already have a healthy gap up off of yesterday's selloff.  I don't think anyone wants to be short ahead of the ISM.  I thought 1370 would prove to be a significant barrier but based on the price action, I'm thinking we'll probably have to get to 1400 before a significant shake out.