The Market is Already Showing Signs of a Big Run Up This Year

I want to start off by wishing everyone a healthy and chopalicious (insanely profitable) new year. I hope everyone enjoyed the holidays and the time spent with family and friends. I got a chance to take some time off and feel recharged and ready to grab this bull market by the horns!  And oh I am about to be the new owner of a chocolate lab.

I wanted to take a break from my articles on HFTs and Tape Reading to talk today about my views on the market and my expectations for the new year as a short-term trader.
At the beginning of 09 the market appeared to want to go to zero (or something like that). After some impressive volatility and volume we put in a bottom and rallied much faster than most market wizards had anticipated. Then going into the later part of the year the SPYs consolidated in a very tight range. There were no signs of a major pullback. Boy was that not fun to trade into end of the year!

My job is Trader (well Head Trader to be most exact) and not Analyst. I read many blogs on the weekends to keep the macro picture and fundamentals in perspective. And there are some very compelling arguments for a market retracement and some good ones for higher prices. But as a short term trader the price action and market psychology is my leading indicator. And it is not looking pretty for the shorts let me tell you.

Think about it, there ought to be some large funds that were hoping for a retracement to get in, or most likely, increase their stake. There are also some funds shorting this market hand over fist betting the worst is not behind us.  But every possible break attempt to the downside has failed miserably. And then there are those sitting on large longs not pressed to lock in gains because of this.

Now coming into this year, we have worked off a bit of this overbought condition with that tight consolidation. Underperforming funds will be forced to chase this market as it upticks without them fully committed. Those already heavily long are looking to press their bets. And those shorts will be forced to ride the pain train and cover higher.
And the price action during the first three trading days of the year seems to confirm this bias. There has been some serious rotation of money into sectors, not just individual names.  On Monday and Tuesday we had Financials and Casinos partying like college kids at a toga party. Wednesday we had oil services and metals/commodities working in unison.  The next couple of days I wouldn’t be shocked if we see solars, consumer staples, retailers, and so on just get pumped with fresh money.

With that said I am very much amped about this year. It should be a phenomenal trading year with or without the HFT nonsense. I have spent quite some time thinking about my trading and creating a roadmap for this year. I created my plan and it is time to execute it. And on that note Charles Kirk wrote a fantastic piece on how to go about creating a roadmap for the year. You may read the article here. Happy trading!

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