Some would say that the price action was a lot more than convenient for Wall Street after 3 weeks of doing nothing, to finally move on the last day of the quarter, around 0.15% to make the move to new record closing highs and to do it with a 3-day weekend to promote the move just as new dumb money has its chance to move in to the market.
Here are some recent posts of thoughts regarding the invisible hand of Wall Street that guides the market in the near term...
Wednesday March 27, 2013
Market Update***
I'd be patient, lets see where the market goes, what it does as it is going there and what other assets are telling us. As the end of the quarter is upon us, there may be some effort to push the SPX to new highs as new clients for funds receive their prospectus to join a fund and somewhere in there the phrases, Dow and S&P at all time new highs, it's just the psychology of sales.
Wednesday March 27th, 2013
GOOG Charts
"one reason I can think of to torture every asset possible to try to hold the market up or move to the new high (which it almost seems as if they don't want to do, or at least not yet), would be the end of quarter which for all intents and purposes is tomorrow as the market is closed Friday and Monday is April. As far as trades that count on Q2's prospectus, those would have had to be in days ago because of the T+3 settlement rule (Trade plus 3 days to settle) so window dressing in the sense of a fund's holdings doesn't seem to be the issue, but as they are looking for a flow of new money in to all kinds of assets whether they be 401k, IRAs, Mutual Funds, Hedge Funds, CDs or other derivatives linked to the market, there would be no better time to let that sink in than the lat day of the quarter with a 3 day weekend and news screaming about the Dow and S&P at new all time highs.
What happens? The Greed effect take over, the "I missed all of this when I was only getting a fraction of a percent on my CDs, I'm getting in the market" and that creates a feeding frenzy for Wall Street, except they are the sharks as you'd expect and nothing good is going to come from making a decision to enter the market on the greed effect of propaganda, but to me, that's the only reason I can see that this market has been within fractions of a percent and not been able to cross the line."
Thursday March 28, 2013
Lever Activity
HYG is just going positive in some early timeframes, it is one of three of the SPY arbitrage components in the CONTEXT model for SPY arbitrage.
It will be interesting to see if rates and volatility follow next, if so, then we are 1 step closer to my theory of a 3 day weekend with the headlines everywhere, Dow and SPX at all time new highs right as the quarter ends and just before new money can come in to many of these funds.
Thursday March 28, 2013
Last Leading Indicator Post For the Day
So far my theory is half correct or on course, we don't have a close yet and as I suspected, even on the new high, few would be willing to chase risk as there has been such a strong flight to safety. Now I think we may know why the SPX was only 2 points, a fraction of a fraction of a percent away from the new high and was held back from breaking it for over two trading weeks, it's as I said yesterday, or that's what I believe.
Now you can see clearly my thinking in a very short term call and slightly longer term put, this market looks like it's being artificially inflated right now, I believe it is for the SPX and DOW all time new high print that will be splashed across newspapers on a 3-day weekend at the EXACT last day of the quarter, when new funds have an opportunity to flow in to the market, in to IRA's, 401ks, Mutual funds, hedge funds and more.
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As you can see from several posts before the close of the quarter, this behavior was expected. In fact, Saturday and Sunday night I received no less than 5 calls from friends and family asking if now was a good time to put money in the market.
One friend was told by an investment advisor that history shows if you choose any 5-year period over the last century, "It's impossible to lose money" and now is a great time to put money in and she should keep putting money in, including any profits as well as 10% of her gross pay every month.
While the investment advisor was pretty close to being correct historically, the last 15 year or so would have challenged his statement a few times as something has clearly changed in the market.
In fact I didn't have to do much more than turn on the TV while waiting for family to bring dinner out to hear exactly what I expected on the local news. This was sent to me by a member over the weekend by a member...
"Hey, Brandt,
You may have read this, but looks like the second part of your story is coming to fruition. "
"Mom and Pop Run With the Bulls" from the WSJ March 29, 2013...
"The market's record-breaking spree has raised a new fear in many American households—dread that they are missing out on big gains.
When stock prices collapsed in 2008, the bear market wiped out half of the savings of Lucie White and her husband, both doctors in Houston. Feeling "sucker punched," she says, they swore off stocks and put their remaining money in a bank.
This week, as the Dow Jones Industrial Average and Standard & Poor's 500-stock index pushed to record highs, Ms. White and her husband hired a financial adviser and took the plunge back into the market.
"What really tipped our hand was to see our cash not doing anything while the S&P was going up," says Ms. White, a 39-year-old dermatologist in Houston. "We just didn't want to be left on the sidelines."
And just as expected, the Greed Effect take over at exactly the wrong time and place.
As we head in to the new trading week ES and NQ both opened the week early with negative divergences and fell a bit before moving in line or to a positive divergence in NQ's case.
NQ's Sunday night open and current posture...
In FX the EUR/USD opened much like ES's current posture...
However the Carry Trade pairs that help us tell what smart money is doing with the financing they raise tell a slightly different story...
USD/JPY opening this week...
And the recent trend in both carry pairs as we have been watching them for hints...
Daily USD/JPY
And the Yen's movement relative to the SPX as one of the primary carry drivers...
Even as PM Abe is elected and nominates some of the most dovish BOJ governors in recent history to try to halt 2 decades of deflation, the Yen has trouble holding it's downward trajectory, despite all of the recent BOJ jawboning, trying to keep the Yen falling, it seems recently the carry is being closed as the Yen has to be bought to close Yen based carry trade.
As you may know, over the weekend North Korea's spoiled brat son of Kim Jong Il, Kim Jong-un has declared a state of war between North and South Korea, as February's North Korean Nuclear Weapon's test drew more sanctions against Pyongyang, this latest move is seen as a new level of tension emanating from the February test. The US has made a show of force with stealth fighters and bombers flying in to South Korea.
Meanwhile in Cyprus, uninsured depositors face a complete wipeout, that is if they hadn't already removed all funds while the EU tried to recover from their first bailout plan that nearly sent all of Europe in to a bank run. One of Italy's banks announced this weekend they have already seen several billion in capital flight, so as usual the EU solution is causing wider problems and likely what will become even more banking bailouts just as Cyprus started.
At the same time a number of plots have been uncovered accusing Cypriot leadership of doing everything from moving family money out of the country days before the bailout plan to take money from depositors was hatched to loan write-offs from the former president that led to the banking insolvency.
Meanwhile several people including the former OMB under Reagan's have warned that the financial sector has been protected under various bailout and Central Bank schemes creating a more fragile economy and drastic mispricing of assets, essentially warning of a Black Swan in the Financial sector through government subsidizing of risk. All in all, not a good weekend for Central Bankers.
From Geo-political events to the Chinese/Australian move away from the $USD as reserve currency to the EU tempest in a tea-pot escaping and turning to a full-blown financial hurricane, this week should be nothing less than interesting.
We'll be looking closely at Gold this week as futures seem to hint at growing accumulation as the new week begins.
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