Throw Out Your Playbook

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I’m not a Pollyanna or a perma bull or bear, but it’s quite possible we have entered full stock market melt up mode. The fundamental or technical playbook isn’t as important or telling as it usually is, because risk has left the building for now.  Some of the skeptical bulls are asking what the next catalyst will be to send stocks even higher, while the bears look at a weak macro snapshot and wonder how we are even here at all.  It really is fascinating when you think about it, yet bull cycles often don’t make any sense at all. The technology bubble confounded everyone, yet it kept running until it didn’t. Then it ended in tears.

I don’t care about volume because the depth and breadth of this market is really quite healthy,  and most sectors are involved now. We have basically doubled the $SPY on low volume since the depths of the 666 lows., (net out the original short squeeze volume).  Housing ($XLB), materials ($XLB), financials ($XLF) and tech ($XLK) has finally woken up. The fact that utilities and consumer staples are at the highs isn’t necessarily a negative tell, because true bull markets lift all boats anyway.

The world still prints, and although there has been some conversation about the “The Bernank” curtailing QE, keep in mind that we are probably one soft employment report away from that being right back in full wing.  So bad is good for the market. God forbid things do improve…watch out above.

We witnessed about a 50-60 handle dip in the $SPX in mid April, it got bought, and we’ve been in rip mode ever since. The bulls want to be so much “more long” than they are, but they are waiting for a pullback to take meaningful long positions. A non meaningful pullback leaves them no choice but to chase prices higher.

Bull markets bail everybody out, and if your wrong on a trade, it usually isn’t for long. Good times right now. Have a great weekend and good trading next week.

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Joe Donohue

Joe is a full time trader with 25 years experience. He is a senior contributor and investor in Stocktwits and has been seen on CNN Money and quoted in Marketwatch, Forbes, Reuters, NY Times and Wall Street Journal.