We Have Created a Bull Market Around Wanting it to Get Better

Here's commentary that shows the opening yesterday:

"U.S. stocks advanced on Thursday morning, paced by gains for consumer staples stocks, after new data on jobless claims and retail sales.
The Dow Jones Industrial Average was up 39 points. The S&P 500 gained 0.3% amid a 1.3% gain in its consumer-staples sector, and the Nasdaq Composite Index rose 0.2%.
Initial claims for jobless benefits declined 24,000 to 601,000 in the week ended June 6, though continuing claims hit a 19th straight record high, a sign that the prolonged recession has made it very hard for the jobless to find new work. The figures suggest that, even if the peak in job losses has passed, a recovery to any kind of solid increase in monthly payrolls is unlikely for many months.
Separately, retail sales rose 0.5% during May, the third increase in five months, but much of the gain was attributable to a jump in gasoline-station sales thanks to higher pump prices. Excluding auto sales and gas station sales, retailers saw sales rise 0.1% in May.
Fears that rising bond yields and oil prices could derail an economic recovery squeezed U.S. stocks on Wednesday. After a weak 10-year Treasury auction sent the benchmark yield to the highest levels in more than seven months, the U.S. is due to auction off $11 billion of 30-year notes at 1 p.m. ET.
After the release of the sales and claims data, the yield on the 10-year note rose to 3.97%, continuing its flirtation with the psychologically important 4% level. Yields move inversely to prices.
Oil prices climbed after the International Energy Agency increased its estimate for 2009 world oil demand. The front-month crude contract climbed above $72."


Floyd comment: In Colorado flying home in the a.m. I had the opportunity to read the USA Today. This is written for those of with 8th grade educations (really), and had a great simple article explaining how the "recession was soon to end" and by late fall we'd be in "good shape."

Floyd rule #478: When the newspapers and financial magazines predict something, most likely the reverse will soon happen. So we'll lead next with what the Dow did. We hit theoretical Dow highs of 8918, and lows of 8696, allowing many traders day trade profits to the put.

Let's hear from a few subscribers:

DS:
Just a quick comment and question. Market has been climbing on declining volume for 2 months now most notably the last few weeks. To me, its so obvious buying power has been exhausted here as everyone waits and the MM’s continue to artificially boost the markets trying to lure in more buying power so they can they start to unload and let the sheep slaughter begin. So question is… this is just one perspective of how I am interpreting what I see in the market right now… But this doesn’t have anything to do with S and R so with this said, how do you know when you see definitive S and R levels begin to be violated by the sell-off? Is it also a volume issue? Watching the tape?

MP: I hope your trip went well..

Listen...how do you deal with the following scenario?

I had not positions and watched the market climb today to 8925 on the Theoretical DOW...just shy of your 8950 resistance...

After she settled down I purchased some 445 puts at 7.30 (when the DOW was up about 95 pts..)...

She did not drop like I expected but did come down slower towards the end...

At 3:53...I decide to sell them for 1.00 profit (8.30)....2 minutes later the bottom drops out and 10 minutes later after hours the option is going for 9.80 BID price!!

That is another 1.50 profit in 10 minutes that I could have had if I would have just waited...

Why does that always seem to happen to me? When I hold out for more I get burned and when I don't hold out like today...I lose big time profits...

How do I remedy this situation?

It drives me nuts and makes em angryf!!

Don't get me wrong...I'm happy with a 1.00 profit but when I could have had 2.50 profit instead in only a matter of minutes...that irks me little bit...and it seems to happen often to me...

Your thoughts?"


When the Consumer Price Index came in at 54.9, up from 40.8, there was euphoria.
But the National Home Price index fell 19.1% from the first quarter last year, the biggest drop since the index started 21 years ago.

Unemployment is a lie, and has been for years. It only shows who are on the rolls of unemployment, yet all the unemployed reflect on a cost to our citizens, and to our work force. The unemployment came in at 610,000 but the government went up from a .004% to 8.9% on a seasonably adjusted metric. This means it’s worse than it looks, but we all overlooked this, and it will get worse once GM and Chrysler send their waves of bankruptcy through the cycle of the businesses they work with, from vendors to their retailers. We see 700,000 a month from the government cycle as reasonable, and personally see unemployment in the U.S. at over 20%, in Floydian “real” numbers.

We must remember that in the first quarter companies wrote off everything they could, while they could (we had a negative 6% GDP), which drove earnings freakishly low, and in turn drove up the Price to Earnings Ratio on stocks.

What it really is that people are trying to get their money “back,” to “break even,” and the first quarter earnings looked good because of the write offs. We have created a bull market around wanting it to get better. Typically these are drivers for sell off when reality sets in. The Market Makers don't know what to do but buy to fill their portfolios, and we begin to take data and interpret all of it positively.

We think the market will go up well for the long term, but remain concerned the upside without consolidation, on low volatility and volume, is showing all charting signs of bearish wedge,and sell off.

We remain: Long Gold./Short Treasuries.