I’m on the record — more than once — with a prediction that the broad averages would plummet only after springing a nasty bull trap from record-high levels. But is that in fact what has happened? I can’t tell, at least not yet. What I had originally envisioned was that the Dow and S&P Index would climb at least 150-200 points above the old highs; that everyone and his mother would turn hell-of-bullish; and that the resulting hubris would reach a deafening pitch. Instead, the broad averages recorded merely marginal new record highs last Friday on the opening bar; then they began to fall at a pitch that could easily steepen into something scary this week.
Not only was there precious little hubris when this fleeting peak was recorded, there was outright skepticism. That’s because the short-squeeze that caused it was triggered by payroll data that everyone except the financial press knew to be worthless at best, a fraud at worst. Small wonder, then, that the report of 192,000 new McJobs added to the allegedly recovering economy generated a froth that lasted for all of ten minutes.
Wetting Their Pants
Was that it!? If so, and the stock market’s decline picks up steam in the days ahead, investors could find themselves wetting their pants by the time the closing bell sounds on Friday. I say this because if U.S. stocks have indeed entered a bear market, the jig will be up for the economic spinmeisters: their “recovery” hoax will be laid bare, The Great Recession will return with a vengeance literally overnight, and the dam will burst for economic problems that have been held at bay, albeit barely, by op-ed cheerleaders and the credulous, smile-button idiots who package the news.
Because EVERYTHING we pray for, economically speaking, has been riding on expectations of higher stock prices, it is plausible that the broad averages need not have reached fabulous new highs to set up investors for the Mother of All Bull Traps. We shall see. Meanwhile, at this very moment, in after-hours trading, mini-index futures are up the equivalent of 23 Dow points. This feels to me like a great short-sale opportunity. Of course, it exists only because there are but a relative handful of sleazeballs working the night shift, filling soft bids with exquisite delicacy. My guess is that by Tuesday’s opening bell, the game will have turned ugly. _______ UPDATE (3:49 p.m. ET): Turn ugly, it did not. Here’s a serviceable explanation from a post this morning in the chat room: “All [this guru] is saying is that there must be a bounce after 2 day selloff. He continues: ‘Now, with that said, it would be a mistake to think that I’m just ignoring the last two days of declines. it has been fast and furious. I would suggest selling any losers you have into this strength. Just try to raise some cash because the market has indeed changed a bit. But the important point to remember is that the S&P IS at support. Expect the expected. I expect a bounce because that’s what’s happened last time…and the time before that‘.”