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May 6, 2009

Easy Money

Okay, I'm going to give everyone a trading tip: buy the market everyday at 3:30. Don't worry if stocks are already up 3% or whether it seems prices are about to fall off a cliff. Buy at 3:30 and bank easy money. This rise has been just spectacular. Relentless. Just look at it:

spx chart

My only explanation is that were just too many people trying to be smart on the short side (ahem). On every dip, shorts would take profits and create buying pressure and on every runup, shorts would get squeezed to create buying pressure. If someone can determine when the shorts will be exhausted, it will be worth a fortune. Whenever this thing breaks, it's going to be fast and furious and will probably take price at least down to the SPX 833 pivot seen at the April 20 low.

spx chart

The uptrend line I've been watching halted today's rally. Will it be strong enough to turn the rally down? No one knows for sure, but I will note that the spyders keep showing up on the WSJ's selling-on-strength chart every day stocks rally to close at a high. The $39M of selling seen today is not huge, but the numbers keep adding up. When was the last time SPY made the buying-on-weakness list? The answer, of course, is rhetorical. It's been a while.

Just in case you were too busy lifting your middle finger at your SPX charts to notice, commodities were spectacular today. The CRB was up 2.5%. Silver gained almost another 3%. Oil, 4%. And did someone mention natural gas recently? I think it was Gary telling us to buy UNG. Up 8%.

The strength in precious metals collaborated with strength in the general equity market to send GDX up 6% and, as noted by Rosabarba in the comments section, gold broke out of its consolidation:

gold chart

So, I'm keeping my PM positions floored, and waiting patiently for a sign that I should reload my short SPX trading position.


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