Gaps get filled, and today the market gapped up around 1% higher in morning trade. That should signal to the trading community that in the next two weeks we will revisit the $1605 level or so on the S&P. Now, as you know, I am long so I will take what I can get. Yes, I do have a few short positions via options, but mainly I am using these as a slight hedge (maybe 5% of holdings) against my “perma-long” lemming-like buy and hope/hold equity allocation (yipppeeee). I am bullish on Amuuuurrrikka and on stocks over the very very very long term, but right now in the short run I am slightly bearish. Today is likely the window dressing day because tomorrow is the last day of trading for the month and Hedge Fund managers don’t want to get busted marking up their stock portfolio on the last day of the month. So, today we found out that the biggest hedge funds are indeed long and are marking the tape higher today to some degree.
Managers aren’t dumb enough to try and mark the tape on the exact last day of the month, because they know regulators (if they were looking) could easily spot end of the month “fake” buying of equities.
Most people think stocks act randomly and don’t understand that big money can actually “MOVE” stocks up or down by placing buy and sell orders in a given name. The supply and demand aspects of stocks work just like they do in any market and stocks today are up because of “demand” more than anything else, aside from the FED’s pump priming.
Look, the FED is doing a good job of getting what they want. The question is, as a society, do we want what we are getting — vertically rising stocks are creating two Americas — the rich who own stocks are getting richer while everyone else is getting poorer. I have long argued that forcing equity prices higher and “making” them stay at overvalued, elevated levels is a strategy that will gut the middle class eventually but I am also part of the problem because I own equities.
In the end, QE is not exactly fair to the poorest Americans. It creates two societies — stock (corporate) owners and wage slaves who are merely used as inputs into the corporate stock market system. It’s certainly NOT free market capitalism — it’s more like socialism for rich people.
That being said, I am personally happy when stocks go up and nervous when they drop — it’s sort of sick and sad really but it is what it is.
Lastly, gaps get filled so don’t rush out and buy stocks here expecting to make any money. This may well be the top for equities as the pendulum swings back to Labor from Capital. Gaps get filled so if you are going to execute a short term stock strategy, sell the rip (or short the rip) and be careful buying dips because the market is already quite extended.
The virtuos circle argument is not the same as it once was — today, technology is making human labor redundant but the owners of robots are benefitting at the expense of the poor factory line worker. It’s a bizarre dichotomy that may eventually create social unrest.
Technology is the greatest tool in the world for economic advancement, but like anything powerful it can be used for good or evil. Which will it be America? Inevitably we all live in a stock-centric society. 100 years ago, we lived in a farm-centric society. Technology is the wild card in the room.