Anyone remember my Blog post from June 6? The Market is going higher and doesn't care what you think? And the target? Well the SPY as already taken out the resistance level I had drawn. The QQQs are next.
And we have headlines like this:
All of sudden people are paying attention to Investor Sentiment and all sorts of other black magic. But here's why you need to be careful taking a survey indicator and extrapolating market movement, especially in a shorter term timeframe.
Here is the AAII Sentiment Indicator, fresh off the presses.
It would appear that retail is joining the party and as you and I both know, they always get in at the wrong time. Or do they?
Let's look at the SPY chart again. This time, pay attention to the three red vertical lines. They roughly line up with the peaks on the AAII chart above.
Do you see it? The market did not capitulate. The market kept going up.
Why would that be?
Take a look at this chart: its the Fed Balance sheet Special Purpose Vehicles - the things the Fed creates to defraud the public and pass money to the devil, i mean JP Morgan, et al. the horribly drawn yellow lines roughly match up with the red lines. What do you see?
What I see is massive liquidity. This means the Fed lends money to big banks and hedgies at like zero interest rate and you know what they do with it?? Put in the market. Risk assets. The market started dropping when the Fed got aggressive reducing liquidity / bullshit loans to the devil - November 2021.
Here is a better look at it:
Now, lets put it all together:
Now I have added a yellow line. And that line lines up EXACTLY with the graph right above it - when the Fed started going apeshit crazy with liquidity.
So, a couple of conclusions:
AAII Investor sentiment is wrong - I mean that retail gets in the market at the worst possible times. This has been statistically shown.
Indicators like this are interesting but they provide little to no value for deciding on investments.
This time IS different because of what? The Fed - it is artificially supporting the markets. Again. With your money.
The party won't be over until the Fed is forced to stop. Do you know what does that? Inflation.
So the next time some nitwit tells you the Fed does not manipulate the market, show them these above graphs and tell them to cram it.
This is not investment advice. Nothing in this document should be construed as investment advice. The opinions offered are the Author's only. This document is for entertainment purposes only. Always consult with your advisors before investing any money. Readers of this document agree that they will not use this information to make investment decisions.