Wednesday, May 8, 2013

Upside Down Market

This market is upside down in more ways than one. Primarily because there are buyers at higher levels and sellers at lower levels. Higher levels are bringing out buyers due to performance chasing, momentum strategies, (low) volatility driven algos, HFT momentum ignition, short-covering, small investors watching CNBS wanting a 'Dow 15,000' hat of their own, and of course the ever-present Central Bank liquidity bid...

All of which is another way of saying that everyone is on the same side of the boat and sellers will dominate at lower levels.

Below is an inverted chart of the Russell 2000, showing attenuation both in terms of time and price. Notice that the 2007 top was observed as resistance several times.  The current high is lower right.  

It took untold trillions in fiscal and monetary stimulus to barely break through a level first achieved six years ago, even as the real economy (adjusted for now-obligatory stimulus), only got weaker in the meantime - pathetic...

Looking at things right side up (below), shows how puny the benefits have been from spending trillions to rescue Ponzi capitalism, since 2007, which begs the obvious question - how many more tens of trillions will be required to get through Baby Boomer retirement?