New Year Action

DJIA, SP500 and NQ100 indexes all had solid rallies today as the best guesses for market direction played the odds on higher. It is hard to fade early action this year since bearish attitudes have clearly never been higher. Any redemptions aside, this market could rally substantially and still be no good in the end. Traders will follow early price action with the reasoning that it is hard to get motivated about downside potential after the death dive of last year. Trading institutions are leaning on the massive governmental rescue and putting trades on which are leveraged by excessive liquidity on the one side and the ability to purchase the best of the highest rated knocked down debt on the other. These trades have a longer time horizon but will pay well if the worst is over. The only caution today was the extremely light volume. The beginning of solid moves are built on sharp volume spikes. As today illustrated, much of the heavy lifting is being done without broad participation. Getting fund managers to deploy funds early and to flap those wings and scream like the chickens they are will take more than bull trap action this year. You cannot fool those guys all the time.