The Way We Were: One Year Ago On March 29, 2010

HedgeFundLIVE — Let’s rewind back to exactly one year ago on March  29, 2010 and see what out Chief Market Strategist Jeremy Klein had to say on that day:

The Gallbladder Fairy 

About eight weeks ago, my 6 year old middle daughter received her first ever visit from the tooth fairy. Just days later, after months of please-cut-off-my-arm-to-make-the-pain-go-away sleepless nights, I had my gallbladder removed. Upon my return from the hospital only hours after the surgery, my daughter asked me quite bluntly if I could stick the discarded organ under my pillow to prompt a visit from the gallbladder fairy. Yes, she was serious.

While the going rate for a child’s tooth may be $2 (please let me know if I am overpaying), I can’t imagine how much I would have cleaned up. Ahhh, the happy days of childhood as one hopes and wishes some old pixie like creature makes a visit to his or her room overnight to trade a few ducats for an incisor or in my case a slimy green useless blob of bile. Alas, I wonder if many of today’s equity and index traders have decided to put future returns underneath their pillow each night in exchange for a continuation of this recent impressive, yet overextended, bull run from the February lows.

If you assume, like I do, that the market should continue to resolve to the upside over the long term, then in theory, the DJIA knocking on the door of 11,000 and the SPX trading in a stone’s throw of 1200 should not bother you. However, I do believe that stocks can move up too far too quickly such that future gains, otherwise garnered under steadier price action, will be sacrificed. Short term momentum traders trafficking in stocks such as GE or even the E-Minis currently risk just that for the rest of us in the pursuit of squeezing more P&L out of this tired market.

How do I know? For the 7th session out of 8, the closing Tick for the NYSE on Friday printed a weak 99, thereby suggesting despite equities giving up nearly 2% from last Thursday’s intraday high, we have yet to see any real money looking to buy the modest dip. The overall Rolling Average Tick sits at 506 which despite being well off its peak of 725, remains solidly overbought. Also, because of the market skittishness, the overreaction to the obvious innocuous South Korean naval vessel’s sinking of the shores of North Korea keeps the 5 day average session range over 12 to provide additional warning signs.

Further issues include the heavy volume on that lunchtime sell off as that hour, usually the quietest of any day, produced 417K traded E-Minis to help supply the most contracts transacted on a Friday in six weeks. Other items on the docket that get me nervous include month and quarter end which despite a last gasp window dressing push up being seemingly on everyone’s mind, we will have asset allocation problems, which I will discuss on Wednesday, that will add pressure to downward momentum. 

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