The Floating Market

The analogy is like a softball floating on a lake. Kids dive and take it down under the water, then continue to throw rocks at it to try and sink it. But it always floats back up, slowly but surely. Meanwhile, through the QE program, the Fed continues to pump and pour water into the lake, albeit slower than before. As the economy grows by itself, it is like the snowpack melting and adding water as well. It has been a bit of a drought, but who cares when the Fed irrigates it?

It scares some wiser people. Guy Adami of Fast Money fame is one of them. The last correction did not correct far enough for his liking. The 1725 level wasn't really broached as the SPX Index touched 1737.92. After that precipitous drop nearly 13 handles short of the mark on Feb 5, it rebounded with a vengeance. Speculators were baking in Mother Janet Yellen to the rescue in her amply sized Wah-mbulance full of Band-Aids with little hearts on them, Absorbine Jr. on tap, and crates of Lollipops. They ignored that dismal non farms payroll report, and another Retail miserable miss this morning. Weather kept her from a second chat with the Senate Banking Committee this afternoon, postponed to next week.

Two NYSE traders echoed the same sentiment. There is a lot of dry powder waiting on the sidelines for a massive one again as all the news has been kinda lousy recently with saccharine earnings sweetening the gruel. Not really many bidders eager for buying into this faux rally, and a Feb VIX expiration looming next Tuesday. So who is buying these dips?

They would be of the type that are having a gun held to their head. PBGC.gov would fit that bill: The Pension Benefit Guarantee Company. There are also lots of funds and ETF's rebalancing. It is a train that cannot stop. Thus, Guy Adami is rightfully leery of this one. I am in that camp too, where you can't ignore that this could re-correct hard, and harder than last time.

As for a chance of that, 30 % at present, but after the three day weekend, more likely after the VIX Expiration, and the next Janet Yellen answer to the Senate Banking gang.