Mini Bull Trap - 200 Day Exponential MA Holds Again

For the first time that I can remember in quite a while... bulls got a little charcoal on their nose. (I have no idea what that means, something to do with coal in their stocking) The 200 day exponential moving average continues to be a ceiling for day #9. I attempted to embrace the bull case with some index longs mid Thursday afternoon as we broke back over S&P 954, but I just sensed this could be a trap (please no applause, I have been sensing traps for 6 straight weeks to no avail - that brings my spidey sense success rate up to about 4% the past 2 months), and backed out when we fell back to S&P 951.

But never fear, S&P futures will surely be bid up 5 points between 7 AM and 9:20 AM Friday... because that one "urgent buyer" doesn't care about what price he pays, and just cannot wait to buy stocks at 9:31 AM.

Just going off my own experience, I can assume every institution which wants to short now covers by 3 PM anticipating an"urgent buyer" showing up to spike the futures in that last 30 minutes, so there are very few people left to squeeze by this point, since we've all been 'trained' to run like scared children at that part of the day.

And everyone and their mother has realized that once the 200 day moving average was cleared that all the people who had been left behind will finally throw in the towel and chase this market higher with their loads of cash. That was the theory at least. It can still come true tomorrow or next week - as long as the squiggly lines say buy, everyone appears willing to suspend reality and buy. I see European indexes are now at the highest valuation since 2004... that's ok, keep buying. Valuation is for the birds.

I do want to point out some consumer discretionary names, especially of the restaurant kind are beginning to negatively diverge. Higher gasoline prices, the loss of the house ATM (past two weeks), not having jobs... eventually matter. I assume this however mostly has to do with gas - wait, gas was the reason consumer spending was up this past month signaling the recovering consumer! (oh, I'm so confused)


Housing is starting to get iffy....


But hey we still have the 2 tenets of any healthy economy... smartphones and oil. Cars? Not so much - smartphones.. we're good.

Other than that, it is only a tiny victory for the bears... the market was still up for the Thursday; but we remain inside our triangle with a false start intraday. As always the close is what matters, and tomorrow is another day to grind up bear entrails. The 20 day moving average quickly approaches the 200 day... within 20-25 points of each other now. Fireworks soon ahead one way or the other.

Random Note of the day: Some of my online friends who have accounts with other brokerages say there were no SPY (S&P 500) shares to short at either Fidelity or Schwab for much of Thursday. So either (a) every small time retailer investor and smaller institution in America (who use Schwab) is shorting this market and hence the most liquid instrument in the world cannot be found to borrow or (b) grassy knolls.

Most likely just a random coincidence...mmmm. Kool Aid.

Comments

[predictorma...:]

This market has a floor. Why fight it? No matter how bad the tape looks at the middle of the day, it always recovers.

I (and others) sensed a change in sentiment for two weeks in May, then the market kicked up (costing me $$) and now you hardly ever hear the expression "bear market rally".

I am going 3X long today. I almost think the next couple of weeks are a sure thing.

Jun 12 10:20 AM

[simplesimon:]

I started tuning in to your station, Trader. A little humor helps to soothe the savage breast, and perhaps calm the horses straining at the gate; along with your characteristic bemused tales of the market , panned back for the ( hopefully) big picture. The jury is still out, for me, regarding what is going to happen. I'm playing it very cautiously now.

Jun 12 10:42 AM

[bones33:]

I'm half in.Buying the dips and selling the rips.

Jun 12 12:39 PM

[Alphameister:]

Sideways is the new down! Welcome to the Second-Derivative market correction (a slower rate of advance). Seriously, even though the market has drifted upward, it is less overbought today than it was a month ago.

Jun 12 01:09 PM

[basehitz:]

Negative divergences:
1) RSI for June was LOWER than May while avg was HIGHER
2) MACD ditto
3) Stochastics ditto
4) Volume has been steadily dwindling as it moves higher. Volume should be building as buyers are drawn in.

Not buying it. This has been a very good Q trading energy. Everything is gone now. I may hate myself in the morning, but that's how I see it.

Jun 12 01:49 PM

[babajay:]

Be careful Mark... ! Yes..! Volume is falling off as we rally, and some groups are beginning to show a little weakness. However ... A gap on monday... on big volume.... Every short in the room will be forced to cover. Also, take a look at the 10 day EMA it is closing in on the 200. If the 10 crosses the 200, all bets are off. I am hoping we get a blowoff move here, but I just dont know. Every pro is bearish(That leads me to think there is plenty of dry powder to fuel a rally). Question is... Who is buying the market here..? Can it still be shorts covering..? Or is there some sinister force driving prices higher....? Hmmmmmm... I wish I knew.

Jun 12 09:10 PM

[Northstar10000:]

Just buy the SDS you will sleep at night.

Jun 13 12:31 AM

[TruongKy:]

Have no worry, the fed has been supporting the market with their 24-hour money printing machines:

zerohedge.blogspot.com...

Jun 13 01:59 AM

[CLH:]

It looks like the easy money has been made although the bottom is in. The market went up 30-50% without most people. To throw away a 50% move is not very bright. However, negative people are never smart.

Jun 13 07:16 AM

[H. T. Love:]

The author spaketh "But hey we still have the 2 tenets of any healthy economy... smartphones and oil. Cars? Not so much - smartphones.. we're good."

Umm, you did hear the Friday report that new cellphone sales were reported to be softening, right? That leaves only oil making us "good". And that will disappear when JPM tells their boat(s) to sail and unload 'cause they can't stand the downside risk any longer. And if GS sells all their futures, for the same reason, ...

Trouble is sellers need buyers and they're in "stash the cash" (I love alliterations!) mode now, at a 5.6% rate (I saw a projected rate heading much higher than that). That's if they're not unemployed (what was it, 9.2% - I guess I'll have to go to shadowstats to get the real number).

HardToLove

Jun 14 01:23 PM

[H. T. Love:]

On Jun 12 01:09 PM Alphameister wrote:

><snip>
> Seriously, even though the
> market has drifted upward, it is less overbought today than it was
> a month ago.

Makes sense to me since the indicators are affected by volume and time. Low volume over extended time with little change in price would "erase" the *indication*, but *not* the condition, unfortunately.

Now, if only that worked for the economic ills that are still besetting us.

*sigh*

HardToLove

Jun 14 01:33 PM

[H. T. Love:]

On Jun 13 07:16 AM CLH wrote:

> It looks like the easy money has been made although the bottom is
> in. The market went up 30-50% without most people. To throw away
> a 50% move is not very bright. However, negative people are never
> smart.

I've heard the same said about those that make "generalizations" and that say "never".

It wasn't me. ;-)

HardToLove

Jun 14 01:44 PM