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TheStreet Open House

The Stock Market Continues Its Winning Ways for the Hedge Funds

Stocks in this article: SPY MSG SOXS BRCM

NEW YORK (TheStreet) -- Does anyone really know why the markets continue to keep rising? I have heard many reasons and opinions but the fact of the matter is nobody has any clue.

The DJIA once again finished on the upside in Tuesday trading, gaining 2.82 points to close at 16945.92, while the S&P 500 was down fractionally at 1950.79. The Nasdaq closed up 1.75 at 4338 and the Russell 2000 was down 3.17 to close at 1172.71.

The overall volume continues to be a major issue. The S&P 500 Trust Series ETF (SPY) finished with a new yearly low, trading 55.6 million shares. That was nearly five million shares fewer than the Jan. 22 yearly low. What is going on here? I have not heard a rational explanation concerning this issue from any Wall Street pundit other than the volume has been gradually trending lower for the past five years.

That is not a valid reason. This stock market is, without question, being controlled and manipulated by the hedge fund community. All 9,000 hedge funds are trying to manage an all-time high in assets under management of $2.7 trillion in a no-volume market that goes straight up after they shorted the market in the April-May time frame. The short-term game becomes harder and harder.

So I will continue to trade this market very cautiously and opportunistically. At the moment I so no reason to change my stance from cautious to bullish. If I were to become bullish, I would need to see the U.S. dollar rising along with interest rates. In addition, commodities and cost of living nflation would have to fall. I see none of that happening at the present time.

If buying this market at the all-time highs is your cup of tea, go for it. I do not work that way as a trader. I buy low and sell high. Risk management with a repeatable process is my mantra.

The market indexes are extremely overbought, as I mentioned Monday. The only difference on Tuesday was the indexes became more extremely overbought.

The SPY will become extraordinarily overbought on Wednesday if it opens to the upside or green during the day. The last time it had such an extraordinarily overbought number, according to my algorithm process, was on Jan. 24, 2013. The same holds true for the Nasdaq and the DJIA.

What this all means is that the market indexes cannot sustain this overbought level without some type of retracement. Does that selloff occur tomorrow or the next day or the day after that? I have no clue, but I am prepared for it and you should be, too.

On Tuesday, I covered my Madison Square Garden (MSG) short at a 1% gain and added to my Direxion Daily Semiconductor (SOXS) short. I am still short Broadcom (BRCM) even though it was down today.

At the time of publication the author was short BRCM and long SOXS.

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

>>Read more: Trying to Profit From the Next Phase of the Natural-Gas Boom

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