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Triple Top Tuesday – Can Low Volumes Drive Us to New Highs?

Posted on the 21 April 2015 by Phil's Stock World @philstockworld

SPY  5  MINUTE181 shares traded down on Friday, 81M traded up on Monday.

Is this what a rally looks like?  I cannot emphasize enough that we are in CASH!!! and don't really give a crap what the market does, so I say this with all possible detatched objectiveness when I ask you – WTF are you playing with?  

This market makes no sense, it moves for unsensible reasons.  It goes up on no volume and the Corporate Media acts like that's the way things are supposed to be because THAT'S WHAT THEY ARE PAID TO TELL YOU.  Are you paying them?  No, you are not.  They are paid to sell you cars and toothpaste and timeshare vacations and, worst of all, Retirement Planning because their form of retirement planning only plans to detach you from your money so the sponsors can retire rich – NOT YOU!  

That clip was from 1976, about 40 years ago and not much has changed since, so why should we worry.  At the time, the country was in the 4th year of a recession having just ended a pointless war that ran up the National Debt and left us with huge budget deficits.  At the time, we had a lot of inflation at the same time because we didn't have a Fed pouring money into the economy and oil shot up from $50 (inflation-adjusted) to $100 per barrel over the next few years during the Iranian Revolution.  

Triple Top Tuesday – Can Low Volumes Drive Us to New Highs?
After the Iranian Revolution, things calmed down and oil collapsed all the way to the $20s where, except for the Gulf war, it pretty stayed until 2000 when the Commodity Futures Modernization Act deregulated the trading of energy contracts and led to the modern age of oil prices manipulation that has nothing to do with the Fundamental laws of supply and demand.  

That's why the price of oil has gone from $45 to $57.50 (up 27%) in just over a month with no change in supply or demand and that's how the price of gasoline has gone from $1.23 a gallon on January 13th to $1.92 a gallon this morning (up 56%).  Keep in mind, there are 42 gallons in a barrel, so $1.92 per gallon is $80.64 per barrel, quite the mark-up!  

U.S. gasoline demand graph
We are, in fact, using 4Mb LESS gasoline per week than we were in January, according to the EIA, while we are producting the same 9Mbd that we usually do.  Gasoline production is, in fact up from 9.0Mbd in January to 9.3Mbd last week and inventories are about 17Mb above the 5-year average.

From that, you may be tempted to draw the conclusion that gasoline should be going down in price – but that's not how the energy market works anymore.  The price of gasoline is whatever "THEY" can make you pay for a gallon of gasoline and it's almost independent of the price of oil – even though that's pretty much the only ingredient in gasoline.  Don't ask to make sense of it – it doesn't because it's nothing but a scam being played on you by the US Energy Cartel to take as much of your money as possible.  

Triple Top Tuesday – Can Low Volumes Drive Us to New Highs?
Howard Beal asked you to get mad in 1976 and some of us did and we elected Carter and things changed and the recession ended.  Then Reagan came along and said the Economy was in good shape but the mean old Government was using all that money to balance the books and should instead give it back to the rich people, who would trickle it back down on the poor people.  George H. W. Bush called that idiocy "Voodoo Economics" and then he became Vice President and shut up about it like a good soldier.  

EVEN THOUGH supply side economics has been debunked via our experiences with the S&L crisis and our more recent market melt-down in 2008, the Fed is now pursuing a policy of Supply Side on steriods by supplying the top 1% (people and corporations) with all the money they could possibly want in the hopes that they will end up doing something productive with it one day.  

Triple Top Tuesday – Can Low Volumes Drive Us to New Highs?
So far, all the top 1% has done with the money is buy more stocks and our economy has languished at around 2%, the lowest average growth in our country's history.  Last year and the year before, Government spending cutbacks CUT 1% and 0.5% respectively from our annual GDP while stock market gains added 0.5%.  That's fine – if you have stocks and the more stocks you have the better that is for you.  Not so much so for those without equity.  

As we mentioned in yesterday's post, China dropped another $194Bn in stimulus into the Glboal Economy this week and we had a huge rally on the news and this morning the Nikkei popped 275 points (1.4%) and the Hang Seng jumped 755 points (2.79%) and the Shanghai jumped 76 points (1.8%) but Europe has already given most of their gains and our Futures are paused back where they began to drop on Friday because $194Bn – unless it were all applied today, shouldn't bump China's $8Tn market 2% higher, should it?  

Triple Top Tuesday – Can Low Volumes Drive Us to New Highs?
That's why the volumes are drying up – money is flowing OUT of the markets.  Here, in Europe, in Asia and that's WITH lots and lots of stimulus aimed at keeping things going.  Even so, it's getting harder and harder to find buyers so what is going to happen when people have a reason to sell?  

That's why we went to CASH!!! while the market was heading higher – it's far better to sell into a rally than trying to sell when people are panicking – most people who got stuck with homes after 2006 can attest to that!  

We haven't gotten out of all our longs and, in fact, we just picked a new Top Trade this morning for our Members on TSN ($37.50) but I can't tell you how we structured the trade as our quarterly free picks are over – sorry cheapskate readers…   

Anyway, we are VERY HAPPY to have our Member Portfolios back in almost all cash and the few positions we have left (mostly material stocks) are doing extremely well (see April Review, Members only) but we're still shorting oil at $57.75 (see yesterday's 5% Rule™ lines) and we're still shorting /ES (S&P Futures) at 2,100 and /TF (Russell Futures) at 1,170 – all with tight stops above, simply because the reward to risk ratio is high on those plays – so why not?  

Be careful out there! 


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