Yet Another Extinct Species: Realists

Today we learned that the Investor's Intelligence Survey shows the number of bears at a two year low. Central Banks have systematically hunted bears into extinction, even as macro risks have grown continuously in the background. It took three months of near straight up action, but now even the most reluctant money managers are finally capitulating. So don't be surprised that everyone is cheerleading the markets at this juncture, because there are few prognosticators who are not bought in...

Red line below is bearish percentage...

[Source: schaeffersresearch.com]

We also learned this week that once again hedge funds are underperforming the market by a staggering 6% year to date.

http://video.cnbc.com/gallery/?play=1&video=3000153796
[jump to 2:19]

Hedge funds underperformed the market by 50% in 2012 and it's happening all over again this year. No one is going to feel sorry for these guys, but it's an indication that Central Banks don't want anyone thinking about risk management in these markets. The only fund managers that will keep their jobs in this environment are those who remove their hedges and take on maximum risk exposure. 

Gap and Crap
This market has many unresolved gaps. Gaps indicate the market opens higher (or lower) than the previous day's close. Upside gaps are a sign of extreme investor exuberance, as in they can't wait until the day's open to place their trades. It's something you normally see on a parabolic growth stock, not on a market index.  My own non-scientific observation from 18 years of market experience is that 90% of gaps get filled sooner rather than later. Gaps weed out day traders. By definition, day traders open and close their positions each day - they hold no positions overnight as part of risk management. So, if the market makes its biggest jump at the open, then day traders get to sit on their hands all day. The bottom line is that this diabolical market has found a number of ways to bolt investors into their seats for the long ride back into the abyss....

Below I highlight the major unfilled gaps, but as you see there are many more including today's open, which doesn't show up on this scale...