Some musings

There have been quite of few secondary offerings as of late in particular from financials. This has some good and bad implications. It's good because banks are repaying back TARP money (which everyone complained would be a waste of tax payer funds) and it shows confidence has returned to the financial markets. The idea of a financial company wanting to raising money on reasonable terms was unthinkable 2 months ago...they would have had the CEO committed to a funny farm. This about face is a huge, huge, turn around in investor confidence and takes off the government shackles from these companies.... but don't tell bears this.... they will just keep on harping about how bad the unemployment stats and other lagging indicators are.

Now the bad news...secondary offerings like this results in an increase in stock supply and as you know an increase in supply without an equal or greater increase in demand results in a lower price. Perhaps an increase in demand has in fact increased enough.... perhaps.... but history shows spikes in new offers and IPO's is an indicator of an immanent IT top. This definitely fits with the other warning signs I’ve mentioned. So, anyone playing the long side here better have 1 foot out the door. We can still scoot a bit higher in the next day or 2 as I mentioned but after that I think this market will begin to cool off.

The immanent top in the market I expect will be in my opinion nothing more than a 1-2month consolidation phase before the next move higher. This top I'm expecting will be a huge test for the market. Beware if we get a 10% pullback based upon lower high, lower low type action. That would be a warning sign that the bear has be returned.

Another comment on FAZ...I just can't resist. I've mentioned twitter's sister site stocktwits.com before. This site gives a very good sample of the what the fast money day trading community is trading. Day traders tend to gravitate to the "flavor of the month" sectors. No doubt tech stocks would have been the top tickers mentioned in 1999 and 2000. FAZ was a popular ticker since the begining of the year and for good reason at the time given it's meteoric rise. But, despite the fact that FAZ has fallen 95% from it's highs FAZ continues to be the number 1 ticker traded...by a landslide. In fact, it's popularity INCREASED as the stock started this sickening collapse. There is no way the bulk of this trading community on stocktwits hasn't lost a ton of money on FAZ given that it's still near it's all time low...its virtually impossible for this not to be true. Yet despite this, to this day, FAZ is by and large still the top ticker traded...and no, these traders are not shorting FAZ.

This just goes to show that the "unsophisticated" (to say it nicely) traders don't believe in this rally at all. They are convinced that that FAZ, the former ATM, will get back to it's glory days in very short order. But after a 95% drop and what's gotta be a massive destruction of capital you figure that these jokers would learn a lesson...no! And these guys are supposed to be trading the "hot" sectors!!!! This is delusion, denial, and stubborness on the grandest of scales.....