LOL. This is funny. Oh, yeah I forgot, Fundamentals would have kept you on the right side of the trade since March.

Technicals (and following them) is the only tool that would have kept you on the right side of this BS market.

There was no H&S pattern. Imagining a pattern forming and then not having it form is not an argument against TA. Even the H&S pattern from July did not confirm as it only dipped bellow the neckline before taking off. Volume is very important. It is a direct indication of participation.

TA is not about predicting the future it is about making the odds, building a thesis, and managing risk.

1) The S&P is touching the major down trend line from the 2007 highs. I think that until this is broken and successfully back tested this confirms that we are still in a primary down trend.

2) The S&P has broken (on massive volume) the uptrend line from the March lows and seems to be forming a rising wedge pattern. This pattern is rare but has bearish implications and the target is a full retracement of the up move.

3) The S&P is very close to the 50% retracement.

4) The Russell 2000 is not confirming this recent move higher and appears to have formed a double top.

5) There is MASSIVE overhead supply on the S&P.

Obviously shorting this market has been an exercise in pain but technicals will have to matter at some point. Otherwise the bill for pushing through this massive resistance will start getting quite large.

What’s the main driver of this rally?
Real recovery

to

What’s the main driver of this rally?
Well, it’s not real recovery – that’s tepid. It’s mainly liquidity.

With this “new (to the public consciousness)” reasoning / and perhaps newly CONFIRMED reasoning b/c people weren’t sure what the jobs number was going to do, what specifically is going to break this rally?

I know you have given a few examples. Everything just seems so implausible now / shorters are truly fighting the Fed. What will pop the multiple asset bubbles from the liquidity bubble the Fed has created? Can popular sentiment that we see the bubbles do it? Oil sustained above $85? Or do we truly have to wait for their own schedule of liquidity withdrawal? I wish I had the answer.

The dollar will not go down forever and stocks cant sustain this upward pace. We might not see a major sell-off this year, but this market is well ahead of the fundamentals and government intervention can only take us so far. At some point the private sector has to take the reins….If we dont see that occurring soon we are in for trouble.

Since the March lows people have been saying: “This market is getting ahead of itself…” / “The fundamentals don’t support this…” / etc.

Everyone has been waiting for bad economic data to say: “See, I told you the market was ahead of itself”, to be followed by a collapse of the rally.

Well, the major piece of economic data everyone’s been waiting on came Friday – and the employment numbers weren’t good.

There’s been some media/analyst sugarcoating – the standard talk about “a lagging indicator”, and talk about temporary workers being up – but not overboard: there are many stories on the grim jobs picture. I think a 10.2 print is bad enough no one is going to talk up the report too much.

Rather, what I’ve been reading is acceptance that economic data will be bad. I’ve even been reading about relief that economic data is bad – as that means continued loose monetary and fiscal policy.

Before: Rally reasoning based on recovery thesis.
Key features: General non-acceptance of bad economic data / data that conflicts with the recovery thesis. Therefore, the need to spin bad economic data as good or irrelevant. A sense of fear that truly bad economic data will cause a rally collapse.

Morphing into: Rally reasoning based on central bank liquidity thesis.
Key features: Acceptance of bad economic data. Unnecessary to spin bad economic data, as the rally will continue, bad data or not, as long as central banks keep their loose policies. Essentially, no rally collapse until withdrawal of liquidity.
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I’m not saying the central bank liquidity thesis, or call it reflation thesis, is new. We all know Paulson, et. al. have been playing it for awhile. I’m just saying it has emerged as the popular thesis (it seems over the past week), as the economic data has become increasingly “un-spinnable”.

Can this thesis really take over? And can a market where the blinders are off, where everyone is in agreement that we tank once liquidity is withdrawn, wait until that time to tank?