Futures are very strong today — I expect trading today will be the key pivot point of this rally. If it fails today, we should expect significant downside, on the order of 5-10%.

If the rally shows breadth, volume, and a close near the highs, it will make me rethink my correction stance.

More to come later . . .

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Category: Markets

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17 Responses to “Melt Up?”

  1. george matkov says:

    With the bulk of retail investors like me essentially out of the picture it is getting interesting – and very frustrating – to watch the pros vs the pros vs the machines duke it out during this ‘melt-up’ on low volume. BTW what would the volume be like if the machines didn’t do so much of the trading?

    For all the finger-wagging about how people like me missed the run-up of the past two years, the averages mask the fact that most of the move is due to a small number of high-beta stocks. Have you noticed that the mutual funds have significantly underperformed the averages?

    You have people manning the screens 24/7 so you can sell as soon as there is a whiff of trouble but the rest of us are stuck with the choice of losing a little at a time or losing big chunks of our assets in quick succession. ….

    You get the picture.

  2. “…If the rally shows breadth, volume, and a close near the highs, it will make me rethink my correction stance…”

    http://finviz.com/futures_charts.ashx?t=ES

    recent holding of ~1300 looks +
    ~~

    as an aside, re http://finviz.com/futures_charts.ashx?t=HG&p=w1

    whatever happened to the ol’ adage: ~”All Markets have a ‘Copper’ ceiling” (?)
    ~~

    for future reference.. http://coinmill.com/ZMK_calculator.html

  3. budhak0n says:

    Pretty much the way I’ve played it. I’m kind of embarrassed how bullish my current setup actually is, but at a certain point if it looks like a duck, and it waddles like a duck and it quacks like a duck.

    It’s a duck. Would rather have a pullback here though. Just won’t give it to us.

  4. George .:

    Most mutual funds — about 80% — underperform the indices each year.

  5. curbyourrisk says:

    Melt up….wait let me guess…..

    Dollar under Bernanke pressures????

    As for volume Barry. The only VOLUME days are the really big down days.

    I am at that point where I am ALMOST thinking about rooting for a collapse. Maybe then we can get rid of the BS coming out of K-Street and Wall Street.

    Would love to see all the “machines” turned off for one week….just to see what would happen….

    Tell me your not curious what would happen without the machines?????

  6. dead hobo says:

    BR reflected:

    If the rally shows breadth, volume, and a close near the highs, it will make me rethink my correction stance.

    reply:
    ———–
    It’s still early and Libya hasn’t had any incidents yet today but today may be a good day to put on the old thinking cap and tie it on real tight.

    Later, BR added:

    Most mutual funds — about 80% — underperform the indices each year.

    reply:
    ————–
    Very True, but some do much better. You just have to know where to look. Plus, the benefits of active management combined with wide ranging holdings make them a good place to consider … if you know where to look. Also, instant liquidity (if you follow the rules and plan ahead) and no transaction costs are a powerful incentive to keep them in mind.

    That being said, I’m still looking for bond funds to consider when the end of QE2 happens. My research, so far, shows them to be more liquidity gages than interest rate plays. I’m starting to doubt the merits of my idea to move into one or more bond funds as a parking place at the end of QE2. Any insight from anyone?

  7. plop says:

    just buy an etf … i concur that end of QE should bring down inflation expectations and be bond positive … but timing a bit more tricky given momentum of nominal gdp

  8. joinvestor says:

    All predictions involve some amount of hand-waving, but even complex systems don’t give the signals we’ve had from the market in early January without cause. So unless something else can explain why things are different this time, it’s a hand-wringer, but I’m staying put. Again, I think this could be similar to the melt up from Dec 2005 to April 2006 and the subsequent drop in terms of market price starting in mid May 2006. In that scenario, even if we’d gotten out in the first few weeks of January 2006 which was well before the correction in May, the missed melt up (which was a smaller percentage admittedly than what we’ve seen this month in real numbers, but less so accounting for inflation) was more than compensated for by the subsequent opportunities during the drop that followed.

    Unless volume fundamentals alter drastically for some structural reason — like they did in the summer of 2000 with the advent of electronic trading at all the major trading desks around the world — a re-evaluation of a correction hypothesis could be a setup for a sucker-punch by the market. Is something fundamentally different this time? I just don’t see it, and hopefully there isn’t.

  9. Mike in Nola says:

    At every trading desk, the prayer is: “Ben don’t fail me now.”

  10. ironman says:

    BR: I think at this point the 3% correction we saw from 22 February to 24 February is it. The reason why the correction didn’t go bigger, despite rising oil prices and overseas turmoil, is because the outlook for publicly-traded companies in the U.S. has been improving (as measured by dividend futures, which have been rising steadily since mid-January).

    If the rumors that the big financials might finally be turning their dividends back on later this month hold, then you can expect quite a lot of upside movement in stock prices.

  11. Bill Wilson says:

    It sure doesn’t feel like this rally will fail today.

    I’m thinking tomorrow will be the test. If the NPF comes in above 200,000, and the market sells the weather, that could be the start of a correction. If we soar higher, I imagine the rally is still on.

  12. Pocket QQ says:

    It’s a hard hard sell! The market can’t wait to get invested for the weekend. Look at the Fridays before the 3 day weekends this year. Where is the weekend worry? I guess shit never hits the fan on the weekend anymore? It sure seems like the psychology is pointing to distributional phase in the cycle to me. Unless, Main Street is so under invested the old psychology is no longer applicable? Where does the wealth effect meet the cost push? Are consumer going to pay up, or remain frugal and tighten back up? Can the current velocity sustain price momentum? What happens if you take the corporate wealth effect away? I don’t think we can afford to find out.

  13. takloo says:

    its perhaps QE2 that is still holding the market up… ? mid-day volume is pretty low but then again the rally since Sep has been flattish 20 day avg volume

    If you know the remaining amount in QE2 and connect that with Rosenberg’s article from today about “What happens if there is no QE3″ … i think we can deduce when the rally might end?

  14. cognos says:

    If we go down, then Im bearish.

    If we go up, the rally will continue.

    (The logic on this comment board has never been less profitable or more of a circle.)

  15. joinvestor says:

    Every one chooses their own windmill to tilt at.

  16. joinvestor says:

    Near term, I think the market is going down.

  17. takloo says:

    Barry,

    “If the rally shows breadth, volume, and a close near the highs, it will make me rethink my correction stance.

    More to come later . . .”

    keenly awaiting your thoughts on yesterday’s rally & today’s pop in precious metals…especially silver.

    thanks