When Will the Stock Market Avalanche Finally Happen?
NEW YORK (TheStreet) -- After being down for most of the day on Friday, the DJIA and the S&P 500 closed higher on the trading day. It must be put into proper context, however. There was no trading volume whatsoever on Friday. As a matter of fact, most of the volume was generated in the last 30 minutes of trading.
The DJIA closed higher by 5.71 points at 16851.84 and the S&P 500 was higher by 3.74 at 1960.96. The Nasdaq, led by the technology sector once again, was up 18.88 at 4397.93 while the Russell 2000, which saw a rebalancing at the end of the day, was up 8.79 at 1189.50.
There have been many reasons why the volume has been steadily decreasing over the last five to seven years. I have no idea what is causing that phenomenon and nobody else does either, but there is a serious lack of liquidity in this stock market.
For example, on Friday, June 28, 2013, the S&P 500 Trust Series ETF (SPY) volume was 160.1 million shares traded. One year later, today, the SPY volume is 68.5 million shares.Old Wall Street pundits will tell you that it does not matter anymore. It is different this time. If you believe that sentiment, good luck to you as we move forward. This stock market is one geopolitical event away from a catastrophic collapse. The Federal Reserve balance sheet is at $4.4 trillion. That is over 25% of the Gross Domestic Product. Consensus macro remains way too high on its GDP estimates for 2014, even after having the first-quarter revision at -2.9%. The CRB Food Index is up 23.5% for the year to date. There is a total disconnect between the stock market and economic reality out there. I will continue to pound the table and tell you traders and investors that it is not different this time. The negative geopolitical events happening worldwide are being ignored by the stock market. The U.S. dollar continues to burn with the Fed policies that are in place. President Putin of Russia will meet with the Argentine president in July. Does this sound like maybe, just maybe, they will discuss an anti-dollar alliance? Folks, take notice. Old Wall Street is not telling you what is really going on out there as the Fed continues to inflate a massive bubble. It will only take one event to cause the avalanche that will be unprecedented in nature. After all that, I came into trading on Friday with Apple (AAPL) as a long position. On Wednesday my algorithm gave me an extremely oversold signal. I sold AAPL on Friday at nearly a 2% gain. That's how we roll at www.strategicstocktrade.com. We buy on the oversold signal and short on the overbought signal. Risk management is so critical at the present time. You need that process. The stock market is not in sync with economic reality. At the time of publication the author had no position in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. >>Why Apple Decided to Introduce New iPods
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