Think Less, Profit More

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One of the easiest mistakes to make in this market is to think too much. Once you start questioning the action and coming up with reasons why it can't continue, you are in trouble. Sure, you can come up with brilliant arguments about why this market is doomed, but no one cares. This market is all about putting cash to work and that is all that matters.

The attitude that news and technicals don't matter has given the action an odd feel. Here we are hitting multiyear highs and the primary emotion is frustration. We have yet to see the sort of euphoria that we had at prior highs in 2008 and earlier.

Of course, we need to play the hand that is dealt and that means embracing this action even if we don't understand it or feel very confident about it. The price action is always the final arbiter and it is undeniably strong. Either hold your nose and stay bullish or stay on the sidelines and underperform.

I'd love to make a dramatic market call and predict that a major change in the action is about to occur. It would be nice to have a shakeup and a little drama, but it seems the more we look for it the more the market continues to drift higher as if there isn't a worry in the world.


April 29, 2013 | 10:41 AM EDT

The 'V' Goes On

  • The fear of being left behind is as strong as ever.

The S&P 500 is up for the sixth of the past seven trading days as the V-shaped bounce continues. The recent action has been a classic example of how this market behaves since the central bankers have gone to work. There has been very little positive economic news lately, although the housing numbers were good this morning, and earnings have been mixed, but there is an unrelenting bid under the market and there is a constant hunt for long exposure.

If you have tried to navigate this market based on news flow, you have been totally out of step and, even worse, if you have focused on the charts you have been misled to some degree. All that has mattered is the idea that the central bankers are in control.

The lesson of the story is to stay with the trend and don't fight the Fed and its buddies.

I continue to struggle putting money to work and it definitely is not getting easier. The solar stocks I've been discussing lately, SunPower SPWR and First Solar FSLR , are still chugging along and the biotechnology group remains strong.

Probably the most notable action is strength in Apple AAPL , Google GOOG and some of the big cap technology stocks. That is probably a function of money managers going to the liquid names to put cash to work. Gold continues its very strong bounce and the only major sector showing red is retail.

Fear of being left behind is as strong as ever.


April 29, 2013 | 8:13 AM EDT

The 'Friendly' Fed

  • Embrace Ben Bernanke and his band of Merry Pranksters. They control this market.

There have been three great inventions since the beginning of time: fire, the wheel, and central banking. --Will Rogers

The best piece of market advice over the last few years is "Don't fight the Fed." We can probably expand that to include central banks around the world, but the concept has unquestionably been correct. Nothing has been more important to the market than the gush of liquidity that bankers are supplying.

This morning, Jon Hilsenrath of the Wall Street Journal, who is one of the Fed's unofficial spokesmen, has an article entitled "Tame Inflation to Keep Fed on Course." The article not only discusses how low inflation will keep the Fed's printing press going but goes on to point out how there is fear that inflation may be too low.

Ultimately, the bears believe that the Fed's policies are going to lead to hyperinflation when it is finally forced to reverse its policies, but anyone who has anticipated that has been chewed up and spit out by this market. The market loves cheap cash and we have it endlessly.

As I've often mentioned, I'm bothered by how the market has an artificial and manipulated feel to it, but that is what happens when the central bankers are in control. Their goal is the relative weakness of their currencies and endless cheap capital, and that benefits the stock market because it is the easiest and most convenient place to park cash.

The key for market players is to recognize that the game is different now. Big-picture economics, fundamentals and even technicals take a backseat to liquidity. The technicals are a particularly good example of how the efforts of the central bankers will offset normal tendencies. Once again, we have a V-shaped bounce after a technical breakdown. Typically, a bounce like we have had over the past six days will see some pressure as trapped longs look for exits and bears reload, but in this market the liquidity forces buyers to jump in and we just keep on running straight back up. It has happened dozens of times since the Fed began easing in 2009 and it is not going to end until the printing presses slow down.

If you want to navigate this market, just keep that simple little phrase, "Don't fight the Fed,' in mind. Don't be swayed by all the great intellectual arguments about how we are on the road to ruin. That may be true, but it doesn't matter right now. Stick with the trend and embrace Ben Bernanke and his band of Merry Pranksters. They control this market.

We have a nice little gap up this morning as the dollar weakens again on expectations of a friendly Fed.

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