Suckers with more irrational hope than money are a dime a dozen these days. Benefactors of increasing selling restraint allowing the market to be pushed higher on the back of a fair handful of issues, the likes are destined to become that trusted interest who will offer their supply only when stocks in fact are cheap. This was their mark late-2008, early-2009, and it will be so again because all the credit in the world aiming to lift credit gone bad is failing to restore confidence necessary to incite animal spirits that alone can sustain increasing stock prices.
No additional pressing of bets so far is proving capable of overcoming subverted market forces. Nor does growing global unrest suggest these pressed, tax payer-backed bets even capable of holding in check extreme imbalances these otherwise aim to support.
Widespread denial of this (even resting in hope) is but first fantasy feeding those many others claiming common stocks are undervalued.
Selling restraint enough to allow an increasingly diminishing portion of advancing shares to push the market higher since late-June 2010 bottom is evidenced above. Manifestation of this off March 16th bottom is particularly stark. Not at all suggestive of healthy underlying conditions. Not at all indicative of a market driven by deep pockets filled with animal spirits.
Selling appears effectively restrained with tribute enough to encourage an unsuspecting deer in the headlights posture throughout the herd. To what part are the CME and high frequency trading employed to the end of confusing those whose lack of company with deep pockets might otherwise be raising fear finds no shortage of evidence on this account over the past eighteen months and more. To the effect a bid appears to be under the market, then, yield hungry suckers all the more are being convinced to remain long.
It's probably a safe bet some among game masters see this as well, and will have no choice but pull the plug when the call for capital preservation resounds. Pick a vulnerability shifting today's fragile systemic landscape. The trip to levels last seen in the 1987-1994 period is likely to be extraordinarily swift once the first step in this direction commences.
No delay yet toward this still apparently inevitable end is proving even remotely perplexing. The "extend and pretend" approach taken to the trans-Atlantic financial system rather clearly finds in the stock market underlying behavior confirming that, adults are quite capable of discerning reality from make believe. Thus, are animal spirits subdued.
Just how much longer the adults will play along is made a little uncertain by possibility that, levitation of the sort seen since early-November 2010 peak might continue (this only to the effect of further weakening underlying technical conditions before top to the market's advance off late-June 2010 bottom at last is reached). Then again, the durability of German and Japanese acquiescence to a bankrupt albatross compromising their export-oriented economies still appears in considerable doubt. Likewise, a certain measure of panic displayed via ill-placed technical strength coinciding with the market's advance off March 16th bottom is not going unnoticed. The market's collapse could commence at any moment.
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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.
Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.
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