This goes along with the overstretched sentiment we saw during December, and the fact that the market continues to grind higher is a reminder that the market can go against logic longer than you can stay solvent when taking the contrarian trade. Wait for the reaction.
Never try to sell at a top. It isn’t wise. Sell after a reaction if there is no rally.
~Jesse Livermore
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clipped from www.zerohedge.com
The simple observation: dumb money continues to be at near record bullishness (IBD, AAII surveys), gold market timers are only 40% in, the smart money is short/hedged in size like never before, mutual funds have the lowest cash level on record, and have experienced 29 consecutive weekly outflows which have so far been compensated for broad NAV declines through artificial price increases: that will very soon end.
We have heard through sources that following last week’s HF insider trading probe, redemption requests at many of the implicated hedge funds have gone through the roof. They will all have to sell some/many of their liquid holdings into the year end. Our only question: aside from the Primary Dealers, the HFT momentum traders who have no balance sheet, and the Federal Reserve, who is there to buy?
