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Houston, We Have a Problem
We have already highlighted the breakout in the PowerShares QQQ Trust Series (symbol: QQQ), and it is has been clear from the market action over the past 3 weeks that nothing else really matters except, well, the market action. As long as prices are going higher all must be right in the world. Right? It must mean something. Why else would prices be breaking out?
But you really don't have to go too far to see that something is really, really wrong with this rally. It is volume. Where is it? How bad is it? Well, Houston, there is a problem. See figure 1, a weekly chart of the QQQ going back to March, 2009.
Figure 1. QQQ/ weekly
The breakout above the 58.46 key pivot level is noted. Volume bars are in the lower panel. The pink dots on the price bars are those times when the QQQ traded less than 200, 000, 000 shares in a week. Excluding the last 4 weeks in the markets, all but one of those times were holiday weeks like Thanksgiving or Christmas. In other words, the volume that we have seen in the past 3 weeks is on par to holiday trading.
So while we can debate the state of the economy and the importance of valuations, we cannot debate the shrinking and absent volume. It is an un-arguable fact. So is price and right now that is all that matters and all that investors see. But the volume will matter some day. It usually does when you least expect it.
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These sellers reload with new stock grants from their company. No need to buy from the open market.
The same funds and speculators that always own them. If the trend changes, you have a very illiquid market and prices can fall precipitously.
It does feel like a harvesting is coming soon. Monday or Tuesday?
Am already "short"! Calling all Black and Grizzly Bears..
"Take off is optional, Landing is a must"
I don't know how the professional bears do it. The guys with enough money and strategy to really move things I think they wait for the market to get into the most precarious state possible, and then short massively on newsflow (but I don't really know). Professional bear attacks are really rather new, to this era at least.. You didn't see these guys during the huge bull market.
The Fed seems to jawbone a lot to keep these guys at bay. But I think in some ways it makes matters worse (investors take on more risk at adverse prices). Who are they really helping?
No rush. Let the bulls climb further out on the ledge.
Are they trying to leave without anyone noticing?
The rats are off the boat.
Get back on board, dammit!
Yeah!...Price and volume, usually, go hand in hand. Right?
In any case, I'm looking to "short" this puppy, sometime, next week!
Right?
Save yourself some money and wait. The HFTs own the market when volume is down and they drive it relentlessly up. My theory is that they're trying to drive volume down so they can get even more control. There are a lot of pieces that fit well with the theory. If the theory is correct this ramp up will be different. The weak point of the theory is that the different HFTs would need to work in harmony. Would they? The Fed and Obama would both want them to push the market to new records but is it possible for mulptiple vampires to play well together?
Testable predictions:
Volume will continue to decline
The market will rise with a politically appropriate timing
Highs will get higher and lows will get lower
For additional predictions imagine you are an banker without a soul and now have the ability to put the market wherever you want, what would you do? (pump and dumps must have governmental authorization, though)
You are kidding yourself. A herd is a herd, including the machines. Low volume = illiquidity. When volume thins like this in a bear, it's time to buy. The reverse is also true. There are exceptions, but all the other data I'm looking at suggests a reversal is on the way soon.
they can drive the markets up togther, but see. they will reach a point where they have to book the profits, then they can not work hand in hand.
Its a zero sum game for the big guys, go short wisely...
Good advice. Also, when you do short, do it on the very best of the very best of days. Hold with conviction and dollar cost average if it continues to climb. This is a trap door market. When it breaks, because it is so illiquid, it breaks badly.
hey monkey, also dont forget to check the options on your ticker
http://investing.businessweek.com/research/stocks/options/options.asp?ti...
That's when they start grabbing funds from everyone's accounts to cover the difference, like MF Global.
"start grabbing" - LOL! I'd venture to say that at this point, if you can not hold it in your hand or collect revenue directly from any given investment or asset that you claim to "own", then you don't really own it and there is a good chance that whatever it is, it has already been stolen or devalued. Hedge accordingly.
Possession IS the law, what we have now is a modern day hollywood ghost-town facade of a market. Just like those old westerns where they built the front portions of buildings to make a western mainstreet set, when it comes time for all these baby-boomers to call on the real value of their portfolios in order to survive, they will all be sadly disappointed to find out that there is not any real purchasing power or value there at all.
I agree: if you can't see it, hold it or defend it with a Mossberg then you don't own it . That much being said, I'm beginning to appreciate the value of what I call judo-economics -- nothing to do with the house of the red shield mind you:
TPTB are not collapsing anytime soon
Elections don't change that
No amount of protests on wikipedia or google will change that anytime soon either (although I'm damned glad to see the response of actual citizens --- good to knwo there are still actual Americans living in this country)
MFglobal IS complete bullshit, but Corzine ain't doing a perp walk anytime soon either (although if half of you wanna bring the tar and the other half the feathers, I can provide an insultingly thick rope for old Jonny's necktie party)
So I propose to use their strength against TPTB, just like in judo. They wanna shred the currency? Let 'em have their worthless fiat -- I'm holding silver and gold. They wanna jack up the price of Frankenfood? Fuck 'em: I'm growing more and more of my own, and stockpiling wholesale whole food supplies. They wanna screw up the housing market? I'm beginning to pick up a duplex here, a duplex there: income coming in,and who gives a FUCK what happens to real estate prices --- I'm not selling them ever, anymore than my phyzz.
Just sayin'....
possession is the law - not just countries and oil