What a market we are having. Can’t say the stock market is doing nothing because it has been moving like mad. We recently got our feet a little wet with a starter position short on the $DIA with the expectation that the weekly supply could hold and drop the market very aggressively. The CFTC data supported this drop as well as the technicals with monthly demand being removed and new trends being formed to the downside.
So what happened? The weekly supply was taken out which leads us to suspect that the monthly demand that was spiked through may actually be in play. This is something we recognized on the Nasdaq and the Russel 2000. We knew this situation could come into play which is why we never accumulated a large position.
So whats next? When we examine the latest set of data from the CFTC what we can see is that the $SPY CFTC data tells us the banks are accumulating a large short positions as we speak. They have been doing this slowly for some time and they haven’t stopped. So what we are seeing with regards to this recent rally from the lows is that the banks are pushing price upwards back to the highs and are continuing to increase their short exposure as this is happening.
We had Cramer come out early on May 31st and said that the markets look good for a rally this summer and this has come true, one of the times they actually give us something back
just as the casino allows its players to win at times. Without a win one would not continue to gamble. But when you examine where the market was when he said this and where the market is now we are only slightly higher. Not only that, when one looks back they would remember him saying a a nice summer for stocks and only see that stocks rallied from the lows of mid-June to now.
Interesting how the banks were not buying this market but instead selling during the rally. The data clearly shows this. Seems they were not ready to drop the market because they weren’t properly situated with their shorts. This is the storyline as I see it and as the data, technicals and media suggest.