Apr

11

After a series of up moves that would try the patience of Job, all shorts will be covered very close to the top. This is usually after a 1-tick decline just to get the reversalists leaning the long way. This applies to individual stocks as well as the general market. After being squeezed out of one's last shorts, there will not be any up ticks, and the decline will be too precipitous to ever catch the falling knife.

A general feeling of euphoria will precede a violent move.

All remembrances of vivid moves of the past year will be telescoped into one or two fatal moves well before you set up for it.

The market is never content until it fills in all the areas of potential trade that can induce the public to do the wrong thing, including the final euphoric day where for once bonds go up while stocks go up.

After a big decline, like Feb 27, all future days that bare even the slightest resemblance to the preconditions will be raging buys.

The upward sloping yield curve, the cornerstone of bullish ambience, and the downward sloping yield curve, the one key conventionally thought of predictor of a decline in stocks and a Greenspanian recession, are and have been, in fact, completely opposite in their predictivity over the last 10 years or so.

Past chairmen of the Fed are particularly subject to old man's disease. As the second most powerful men in the world while in office, they are treated with such reverence (and as the most valuable person to know aside from the secretary of the interior) while in office, that when they get out they crave the roar of the lions.

James Tar adds:

No one in hedgefund world, or in real money world, is buying into these recent stock market gains, which suggests to me we are going up much farther than anyone expects.

The sell-side trading desk that I use — a real modern-day bucketshop — has not seen a decent buy order in over six weeks. All sales and shorts, except from me. I prefer that my tickets are written the old-fashioned way — in ink. I tell my broker/trader to mark the tickets as "Just Buy".


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