Observation

Time machine

I remember the march low. I remember it vividly because I was on a conference call and when the SP500 hit 666...I suggested while on that call that 666 was too ironic a number for the manipulators at the Fed to ignore. I suggested this would be a bottom. But then being an astute trader (supposedly) I looked for VIX, put/call and volume extremes...none of which occurred. The only extreme that existed was the percentage of people bullish the market were 3%. We did not get capitulation - in fact what happened was we had a huge flurry and large volume of call buying. Just the opposite. Bulls are not supposed to be right - remember. I imagine by the banks who were telling all the pension funds and retirees to sell some insurance against their portfolios were buying those calls. Ironically, they most likely used tax payer money to fund these trades.

Those call trades obviously worked rather well - to put it mildly.

Back to the future

Here we are again...emotional extremes but the market has not capitulated...but we are seeing rampant bullishness. It must be well over 90% by now. Dollar bulls are probably below 3% by now. But that's it. Volume is declining. And institutions are loaded to the gills with inflation assets. I suggest that the situation that happened on the un-bottom bottom we had in march may be able to happen here...we may not get a convincing top. But by the time most recognize the top is in they will have bought every dip on the way down. Remember in March, the lack of a convincing bottom had most people doubting the market's commitment to go up without a retest at least. So, the market was shorted every time it went up and that reinforced the uptrend by trapping shorts who felt flush with money after the sell off.

Do the longs feel that way now? I suggest they do. I also wonder if they are being setup the same way the bears were. The irony is that, the absence of a capitulatory bottom fooled a lot of people. A lot of people did not get long in time...they were too worn out from trying to buy all the way down. Doesn't that remind you of this extreme now?

I prefer the emotional top scenario that I have discussed in previous posts. But it is important to consider alternatives as well. The market like to do what fools the most people...and perhaps a blow off bottom in the dollar may elude us...and the commensurate top inflation assets.

Behold the non-top top may be approaching.