I have never seen such a boring August in the markets. It is deceptively quiet; liquidity is simply drying up. There is very little buy side demand, and the sellers are biding their time. Watch out when this beast wakes up. It began to stir in the last hour of trading today. The hype and scam stocks, certainly Facebook and ZNGA, will experience more pain. Volume precedes price with high probability, and this is the calm before the storm. There remains way too much complacency, which needs to be washed out. ZNGA's next earnings report will be here before you know it, and the news will not be good.
Shorting ZNGA at $14- was neither crystal ball nor intuition. Observing how the market casually absorbed ZNGA's scam and fraudulent secondary offering was neither of those things. At the moment, I do operate on intuition to some degree. I am uneasy how the markets and ZNGA seem to be stuck in neutral, and I do not think this condition will persist much longer. I watch volume carefully, SPY in particular, and it is horrid. We will shortly see what kind of legs this market rests on when the selling picks up steam. Facebook remains a great short. I suspect when the kitchen gets hot, we will see large gaps between bid and ask, even for quality stocks like Apple. The garbage (ZNGA) might not even have a decent bid. It will be about fear and an acute lack of liquidity. The 3 1/2 year bull market is running on fumes. VIX and volume are near all time lows. This is no normal case of the summer doldrums. So yes, in poker I watch the cards carefully, but I am also willing to bet on intuition. Admittedly, the catalyst for selling could be something totally unexpected. I am watching the Treasury market (TBT) carefully, as very few expect a rise in interest rates. September will likely be a rough month.