27 hours without sleep. I think that is a new record for me. Finally got a 4 hour nap and don't plan on staying up tonight.
The last 24 hours of market action has been crazy. We essentially had a mini crash overnight and than a massive rally during the day which got the market back to flat. Talk about a massive trip just to end up back where you were.
The end of the day rally was impressive. It even had some volume to it. I was covering at the open again and covered a little more throughout the day. We went right to 1040ish which is what I have been pointing towards. The low of the day was 1040.78. Talk about going right to that level!! Wish I would have covered more but read a thing or two that clouded my judgment on the short term bearish potential. There were definitely bullish signs even at the open. The VIX really didn't gap up showing fear was contained. I was staring at Goldman front and center at the open as a tell and it basically was never negative. Finally, China outperformed overnight as did copper which never got close to setting a new low. All the tell tale signs were there and I took advantage of them but wish I would have been even more aggressive.
Before I start talking about noise I am a fundamental person first and foremost. Fundamentally, the economies worldwide are slowing and solvency issues are becoming more acute. That is the underlying fundamental reality and regardless of what happens in the short term I think we will below 1,000 in a few months if not sooner.
To the noise going on around us, several comments. I have been expecting a much bigger rally to work off the oversold nature of things and it may have kicked off today. It may not have. Tomorrow should let us know. We should almost certainly at least start up tomorrow with the big reversal today. How it trades will tell you alot. There are many rumors floating around including a ECB rate cut and more Fed swap lines with Europe. Either of those headlines I think the market rallies. It may be no headlines and just technical. There is a trendline coming down from the May 8th ish high that crosses somewhere around 1080. If you break that I think you head to the 200 dma (at 1103) and probably have a false breakout above that also. The trendline from the very top back in April sits around 1110 to 1120.
Anyway, than you have the noise of the end of the month and beginning of the month. Understanding how big funds raise and spend cash is important. I have postulated (not on the blog) that by the end of the month everyone who wanted to sell and raise cash would have sold and raised cash leaving a vacuum of sellers. In this scenario the market has another push down starting tomorrow afternoon into Thursday/Friday as portfolio managers follow directives to raise cash. I am less confident of that view now but it is possible. The otherside of the coin is the market tries to save this month from being horrendous to try to paint the numbers going into month end. I don't really know but the bottom line is this, next week I think you do whatever opposite this week ends up. If we rally much higher going into Friday's close you sell. If we sell off one more time, you lighten up.
So that is the noise. Like I said, the most important thing is you understand what is fundamentally going on.
The wildcard in all of this in the short term is Spain. The country's banking system seems to be cracking. Doesn't mean the tipping point has occurred but it seems close.