"This market is just stupid" you're screaming to yourself. The age old adage that says the markets will do that which causes the greatest pain to the largest number of traders is so painfully true! "Who are the idiots buying it here" you think as you watch the bell weather S&P 500 engage in a waltz with key resistance levels on super thin volume. Of course you are watching idly from the sidelines, having been forced out of risk positions during May's volatility resurgence.
Sure, the year started out on the right path. The consensus world view was that a classic cyclical recovery was under way. Your aggressive long positions were established accordingly but faced a gut check during the early-stage Greece jitters which culminated on February 8th. Happily, you were one of the strong hands that withstood that swoon and ultimately felt mighty vindicated as risk assets surged through March and April. The fundamental data seemed to cooperate with your bullish view as Q1 earnings and the heretofore reticent labor market flashed a bright green light during April.
By the end of April all of your wrong-headed bearish counterparts had been carted out. It was simply too hard for them to withstand the barrage of positive data that proved them wrong and day after day losses on short positions. As the S&P crossed 1200, you were in hog heaven - there were simply no shorts left standing. You were on fire, and couldn't resist adding a few more longs during the meaningless dip on the last trading days of the Month.
But those STUPID Europeans ruined everything, right? You were forced to pare risk positions as losses mounted during May but those worthless sell-side traders were hiding under their desks and wouldn't give you any bids. And everyone knows that if there are only sellers the risk reduction task is all but impossible. Correlations evaporated, technical trading tools became ineffective, and relative value analysis was useless. The only truly logical position was not to have one. "If only I'd been a teacher like my Dad" you'd lie awake at night and think as your mounting losses soured in your belly.
By early June you had hobbled to the sideline. FINALLY you had no risk position. Yes, you'd given back all of your year-to-date gains and were now minimally down as the 2010 half-way point approached. But at least the bleeding had stopped, Phew!
But over the last 5 trading days, the market has ripped higher in your face on no volume. "How can the market be rallying so hard on no real news" you screamed to no one in particular this afternoon over your uneaten lunch. "Who is buying this thing after that horrible housing data?" "What kind of idiot does that? It's got to break down from here into the close right?"
You DON'T want to buy it right here do you? But, there it goes again, up another three handles on NOTHING - Damn it! But it sure is hard to resist. What if it surges right back up to the 2010 highs and you're not riding the wave? You're going to get fired if that happens on the heels of May's disaster performance right? BANG, the 200-day moving average was just toasted as upside resistance. Go ahead, pile on, you're going to miss it for sure. EVERYONE'S getting back in and Europe seems to have it's act together now. May was just an aberration and you were rightly bullish all along anyway. Go ahead and buy it, it will feel good to get back into the game! Quick, the market's about to close and Asia will take it higher for sure. Go ahead, I dare you.
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