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Trade the Markets 06-29-2009

admin on 06 29, 2009

“They’re baaaaaack….”, the correction that seemed to have been unfolding was suddenly halted late last week and our friends with a vested interest in where stock prices are marked at, only a certain times mind you, seem to be back in control of the message.  With the second quarter about to close out and with a new hopeful quarter about to begin, Friends of Stock Prices, a stock advocacy group headquartered on Wall St., appear to want to get their message out to the masses as June draws to a close.  Mix in the lazy, hazy days of summer with a holiday shortened week and the type of thin trading that typically accompanies such weeks and you have the recipe for some spicy-tangy yet sweet level of closure.  There’s nothing like a good round of Markup Madness, especially one that’s a special Independence Day Edition, to get folks together at backyard barbecues to discuss the optimistic future of the USA.  We don’t have empirical data to confirm this but we believe that we tend to see this action about “as much as possible” because the powers that be prefer to have folks discussing things as we all collectively hit “high” notes.  It’s only that this Fourth of July aka Independence Day is one of the more ironically timed ones in recent memory.  The so-called “Cap and Trade” bill passed the House of Ill Repute last week and we may only be a few weeks away with from the government effectively destroying our healthcare system with the same old good intentions.  But don’t worry, just like the socialists in Europe that we happen to be very close friends with, and therefore can anecdotally confirm this phenomena as being true, our politicians will always seek and receive the best care for themselves, friends and family.  This is exactly the same in Europe, even in La France, where we can confirm that those that are “connected”, even the diehard socialist politicians, miraculously opt to be placed in the care of American surgeons when they’re forced to go “all in”.  But let’s give credit where it is due, starting with President Obama, who when recently asked, finally told the candid truth:

“I think families all across America are going through decisions like that all the time. and you’re absolutely right that if it’s my family member, my wife, if it’s my children, if it’s my grandmother, I always want them to get the very best care.”

So if you’re keeping score this means that the public school systems and what will overwhelmingly be the public healthcare system are both good enough for the rest of us but apparently not so when it comes to elitist politicians that are hell-bent on marching towards some smiley-faced hybridized version of socialism and fascism.  But again, don’t worry, because none of this will hinder the recovery that we’re supposed to believe will launch as soon as we save by spending a few more trillion that we don’t have on healthcare and phantom climate change.  We just seem to be getting more and more dependent on our friends in government all the time.  Maybe we need to rename the holiday “Dependence Day” to bring it more in tune with our modern times.  Or perhaps we could act more like Citizens of the World and call it “Scandinavian Model Day” since we’re on the precipice of completely adopting the spirit draining policies that were pioneered by those countries after spending too much time staring at the Aurora Borealis while at the same time…  (Let’s keep this above board)  Again, the irony is that in some ways those countries, and even more so to the south in La France and Deutschland, are actually moving away from their pasts and towards our past as we’re running from our past to embrace their pasts that they’re running from.

Anyway Cap and Trade really isn’t that big of a deal.  It’s only calculated to be the largest increase in American History.  But it does come at a good time too so take heart.  History has proven time and again that raising taxes during tough economic times tends to spur on even deeper levels of recession.  This takes the sting out of the fact that 300 pages of Cap and Trade law was dropped on the House with 12 hours remaining until the vote thus providing not nearly enough time to review it.  Which works out nicely since the wildly successful Stimulus bill was handled in nearly the same way.  The bottom line is that capitalism works and we need to look no further than Goldman Sachs and GE that stand to benefit enormously from their campaign contributions.  The latter will be the recipient of an enormous series of Green technology largess from the government and the former gets to keep writing the laws and to set up the new market for trading carbon credits.  Clearly all is working as it should.  We can see Adam Smith’s likeness beaming proudly from somewhere up in the soon to be sparkling clean luft.

With all of these tailwinds at the back of the recovery chatter it’s no wonder that stocks are jamming higher on nothing more than luft as we head into this weekend’s fireworks displays.  Expect this continue for as long as gravity can be kept at arm’s length or the boys decide to get their summer going at full swing.  Just as the market staged an enormously rally in front of the financials needing to issue equity for capital, we won’t be surprised if things end on a high note as the marketers need to sound all the right notes to entice people back into investing in the stock market just in time for the green shoots recovery tour of 2009.

The Technical Picture:

Above is a current chart of the SPYs that we’ve updated somewhat from last week.  Not surprisingly since the crew was able to halt the slide last week we’ve witness and rebound in the yellow cumulative Advance/Decline line.  We also bring your attention to the 2 ellipses that we’ve drawn in.  The higher one highlights the new 52 week highs that are occurring and not surprisingly that has jumped significantly after starting to tail off for a while.  This can probably best be described by this philosophy: “Nothing is worth doing unless done well.  Therefore, if you’re spending capital to mark things up then mark them the hell up.” Or so it goes.  This is just garden variety market manipulation at this point though however so the SEC and FINRA will of course look the other way, especially when we consider just how many important players are probably engaging in this at present.  Besides, there’s no recognizable poster boy/girl for them to pin the wrap on at this stage.  They need a Martha Stewart or Bernie Madoff to emerge to fit their purposes.  Anyway, the lower eclipse is drawn to include Monday morning’s volume.  If you can’t see it, do not worry, as it is practically non-existent.  But that’s exactly why the hundreds of 3 to 4% upside moves that we’ve seen thus far today are possible.  Smart sellers are backing off and letting our axe-grinding bulls “do their thing” as panicking shorts scramble to end the pain.  During phases like this it can get wild so try to use that to your advantage if you’re riding airy longs and try to hold on tight if you’re on the wrong side as this thing could deflate just as quickly after it has run its course.  The final warning though is that what starts as an illegitimate fraud doesn’t always remain one.  The future news cycle, one that earnings and politics laden, and the rush to invest new capital at the start of a new month and a new quarter can serve as powerful catalysts if this levitation can last long enough so keep your eye on upside resistance that we’ve noted in our prior Week Ahead’s.