This is what happens when traders try and game a correction of overbought conditions and there are no real sellers.   BIDzilla as in Godzilla!

Here’s what we said after the first trading day of the new year:

The two big macro swans – the Eurozone crisis and fear of China’s hard landing — which caused much of the volatility last year have flown the coup, at least, for now…

We hear lots of chatter…about the liquidity trade.  That is,  the global central bank printing presses levitating asset markets.   Imagine the MoMo if, and,  when credit starts to expand.  Remember the “liquidity, liquidity everywhere” theme that drove the 2005-07 bull market?

This trade can last “longer than you think it can and will reverse faster than you thought it could.”  We think the trade, though dangerous in the long run,  still has some legs and the inflating equity bubble could surprise many.   We could be wrong but that’s our thesis going into the New Year.

The first test will be to how the market reacts to what could be disappointing earnings…

Looks like the market is passing the first test as earnings seem to be coming in better than expected.  See Google (up $34) and IBM ($8.52)  after the bell.

The second test was the debt ceiling, which the Repubs appear to be caving.

The Russell and Trannies are at new highs.

Stocks will remain bid until they are not and then offered until they’re bid.     Having sad that, we’re getting long Harbaugh into the Super Bowl.

Predicting or trying to trade short term moves is a mug’s game.   Follow your heart the trend.

Jan22_SP500

(click here if chart is not observable)

Category: Think Tank

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2 Responses to “BIDzilla!”

  1. As posted in this blog (http://www.ritholtz.com/blog/2013/01/bull-market-durations/ ) the current bull market is 3.8 years old, that is the average duration of bull markets. So while not young, it is not necessarily a bull market in its last legs.

    On the other hand, under Dow Theory (be it of “classical” or “Schannep’s” persuasion) the market is in a primary bull market. The classic Dow Theory also flashed a primary bull market signal last Friday 18 (details here http://www.dowtheoryinvestment.com/2013/01/dow-theory-update-for-jan-18-no-time.html ) . A primary bull market, as defined per the classic Dow Theory, has an average duration of ca. 2 years. Furthermore, it is a leading indicator of economic activity. Its accuracy exceeds 70% of the calls, so while nothing is carved in stone, it is not to be easily disregarded.

  2. PeterR says:

    “Follow … The trend” indeed, and don’t fight the Fed.

    Irrational Exuberance” Redux?

    Stranger things have happened!