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This Fed-Dependent Stock Market Will End Tragically

NEW YORK (TheStreet) -- I will admit it, I should have seen this one coming today. The stock market had a huge up day Wednesday. The market has become so dependent on the Federal Reserve and the release of its meeting minutes that is was a given it would be a good day for the stock market.

From day to day, this stock market has no memory. After being down 140 points on Tuesday in the DJIA, it turned right around and was up 158.75 to close at 16533. The S&P 500 was up 15.20 at 1888, within nine points of its all-time closing high. The Nasdaq closed at 4131.54, up 34.65, and the Russell 2000 was up 5.73 at 1103.63. Volatility is the key word for 2014.

I will also go on record to tell the traders, investors and Wall Street pundits that this Federal Reserve-stimulated and -controlled stock market will ultimately end very tragically.

At one point today, a Federal Reserve member actually said it has the tools to control whatever situation will arise. Talk like that is pure fantasy. But the markets and the hedge fund machines push prices to the extreme limits, knowing the Federal Reserve has their backs. The individual trader and investor will pay the price for this manipulation.

My internal algorithm number indicators have time and time again flagged extreme trading conditions. We are once again at the point of extreme overbought, and in some cases extraordinarily overbought, conditions in the momentum growth stocks.

The hedge funds have performance issues in 2014 and they are trying their best to recoup huge losses if they bought those momentum stocks at their yearly highs. Unfortunately, they have created extreme overbought conditions this past week.

As I have highlighted this past week, Netflix (NFLX), Yandex (YNDX), Yelp (YELP), Amazon (AMZN), Google (GOOG), Facebook(FB), and AmerisourceBergen (ABC) are all well into Overbought territory and approaching extreme. NFLX, YNDX and ABC are all extraordinarily overbought. They cannot stay at these levels. The hedge funds have pushed to the max. Be careful in chasing this. You cannot compete and win the momentum game against the hedge fund community.

Without internal indicators that allow you to understand what is happening in the stock market and how the game is played, individual traders will be at a loss trying to outperform. Just ask the mutual funds that are long growth on 2014.

By the way, the S&P 500 Trust ETF (SPY) volume was about 25 million shares lower than on Tuesday.

I am perfectly content and non-emotional when using my trading process. Emotion is not part of the equation. Trading on emotion will lead to failure in the stock market. If you are having performance problems, visit

On Wednesday I added to my short positions in YNDX and ABC. YNDX has a 99.90 algorithm number and ABC has a 99.96 number. Both are extraordinarily overbought.

At the time of publication the author was short YNDX and ABC.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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