The collision of global markets and social mood

Tuesday, May 27, 2014

Enjoy The Ride While It Lasts

Volume or no volume, the S&P will hit new highs today as expected.

Since there have been at least five failed breakouts in the past few months, the fact that the market has continued higher means there is the possibility of a real breakout -- one that holds. Today should be the day we find out.

Any reversal today or tomorrow into the New Moon could be a top or The top. But what if one doesn't materialize? It is still possible for the market to head higher within the current wedge pattern, however, the angle of trajectory could be steeper than previously thought. As far back as May 15th, in the post entitled Gossip And Markets this was offered here as a possibility:

"I am eyeing the possibility of a wedge pattern at a steeper angle of ascent than usual, something that could take the S&P above 2,000."

2,000 may be extreme for now. Getting past the next Fib extension target at 1912.84 is first required.

Several days ago "the Death of Volatility" was noted here and elsewhere. It feels as if it's come true. There is a Fib extension target on the VIX at 8.97. UVXY has been absolutely decimated, falling from 45 to 39 since. SPXL has not kept up with it on the other side. The only good thing is that some weekly SPY 190 calls that looked doomed will score big today, but not big enough.

Still, the market feels frothy and over loved. A recent Bloomberg article noted that "Trading in online brokerage accounts that cater to individual investors is at an all-time high." And the WSJ noted that "Investors are piling into the shares of small, risky companies at the fastest clip on record, in search of investments that promise a chance of outsize returns."

Let's add some emphasis here:

"The investors are buying up so-called penny stocks—shares of mostly tiny companies that aren't listed on major U.S. exchanges—at a pace that far eclipses the tech boom of the late 1990s."

These are warning signs. Joe Public is back big and trying to get rich quick -- all over gain. This is what tops are made of.

Elsewhere, European elections contained a "throw the bums out" message from a citizenry that is fed up with EU bureaucrats and globalists. Here was an interesting take that summed it up well:

Incumbents were hit from both sides, left and right. This feels like a growing movement, and it's not conducive to current Fed or ECB policy, which is all these markets are running on.

Even in Japan, as Reuters noted, the BOJ "has begun shifting its focus from supporting growth to ways of phasing out its massive stimulus," otherwise known as Abenomics.

Investors better enjoy the ride while it lasts.

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