Markets are rallying at the moment because that's the path of least resistance. The market moves in the direction with the least trouble. That direction is up.
But its all smoke and mirrors from what I am hearing and reading, but yes, the path of least resistance.
But who actually is buying? There is no volume anywhere. When the markets sell off, the volume picks up, when it rallies, the volume simply is not there.
So it is the private clients or public investors buying? NO! Stock funds actually had net outflows of $1.33 billion last week, while bond funds enjoyed an $8.2 billion net inflow.
Corporate Insiders Buying? NO!
Corporate Buybacks? NO! SP 500 companies bought back a mere $24.4B on stock repurchases in 2Q, down 72% from a year ago and the lowest in recorded history.
Who is left?
Its all program trading and HFT systems who are doing some 70% of all volume. The rest is all short covering and portfolio managers painting the tape to make up for last years horrendous losses.
Everything tells me short, short, short. But the bears, reality, rational economic thought, and sensibility are fighting the US Government and its army of liquidity. Guess who wins this game? Right now the sentiment is bullish, not aggressively bullish, but still strong, mind you that sentiment was very strong in May 2008, where everyone was predicting a move to new highs. But then again at this moment sentiment has the US Government on its side. Being overbought is simply not good enough for me to start leaning on stocks on the short side.
What I think needs to happen is the following. We continue to print money. Watch Crude and Gold parabolically go higher. From this the USD gets totally crushed. People freak out and start to sell all US assets including equities. This is what will ultimately bring back rational thought back into the markets.
All of this is all conjecture as long as government is unchallenged
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