Is BIG Money Tiptoeing into Stocks, Hoping No One Detects Their Buying?

George Brooks  |

The climb back out of the Feb. 18 – Mar. 16 stock market correction, which lopped off 7.3 percent from the broad-based S&P 500 index, has traced out an interesting pattern, as noted yesterday – equities were up sharply in the first hour of trading, then sideways in an uncharacteristic narrow band until the closing bell. Yesterday was an exception, the stock market traded sideways in the same narrow band the entire day.

Brooksie’s Daily Stock Market Blog: An edge before the market opens.

Wednesday, March 23, 2011 9:24 am EDT

DJIA: 12,018.63
S&P500: 1293.77
Nasdaq Comp.: 2683.87
Russell 2000: 808.66

It is unusual, IMHO, for a “news-sensitive” market to have volatility confined to early trading with so little exhibited throughout the rest of the day.

It’s kind of like the BIG money is tiptoeing-in incognito, accumulating stock ever so carefully throughout the day while taking care not to nudge prices up and attract new buyers.

Wait a sec.! Could they be using a charged rebound in response to an improved outlook in Japan and the Mid-East to feed stock out, taking care not to sell enough to break prices down?

With the exception of the Nasdaq Composite, the Dow, S&P, and Russell 2000 have recouped close to two-thirds of their Feb. – Mar. correction and should be running into resistance.

Right now, at 9:18 am EST Wednesday, I don’t like it. I can change my mind quickly if I see a better show of commitment from the BIG money. So far, that is lacking.

Seasonal Pattern Nearing an End:

Stepping back to look at the bigger picture and asking the “what if” question that needs to be examined from time to time, you should be aware that one of the market’s most consistent bullish patterns is nearing an end.

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November 1 to May 1. has been chronicled by the Stock Trader’s Almanac as the “Best Six Months” for investing. Consequently, this period is often followed by six months, which have been historically below par.

Of course there have been exceptions and variations of the pattern over the years, no pattern repeats itself precisely year after year, but it has merit.

Did the “Best Six Months” come early this time around with the surge in stock prices at the end of August until its February peak ?

Between the August lows and February highs, the major market averages advanced uncorrected as follows:

  • DJIA: +23.8 percent
  • S&P500: + 28.0 percent
  • Nasdaq Comp.: + 34.1 percent
  • Russell 2000: + 38.7 percent

Not bad!

Too early to tell.

Our playground here is a casino. The big boys want it that way. Long gone is the “invest in America” stuff.

A company can beat guidance and projections and still take a big hit in price, even though next year can be a barn burner. Always watch your back, maintain a cash reserve even though the outlook is bright and the market has a good day.

Just a thought: The joint military action in Libya may be designed to turn Muammar Gaddafi’s supporters against him. The West and other powers may have some assurance that this is possible. Why get your butt blown up for Gaddafi when you are in line for a lot of goodies from a host of powerful countries with him gone ? It is also a message to other Mid-East countries, and unfriendly elements that intend to overthrow small countries that may become hostile to the West.

President Obama couldn’t (wouldn’t) pull this off by himself, not his MO, there would have to be some other heavy hitters who have had Libya (possibly Egypt) on their “to-do” list for some time. Giant chess game.

George Brooks

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