07/05/13 A Smart Beast

The market is indeed a smart beast. The DJIA gapped up at the open, effectively taking panicked shorts out of the game, while forcing traders with performance anxiety to chase. The market then reversed quickly, engendering buyer's remorse on the part of both shorts (who closed) and (recent) longs. As it began to undercut Wednesday's close, a second wave of shorts who felt 'smarter' (for having waited) began to open positions, while early morning buyers either panicked or stopped out. Prices then chopped back and forth, 'daring' both longs/shorts to roll the dice. At 12 pm est (as East Coast and Midwest traders began leaving for lunch), the market quickly spiked back to opening highs, indiscriminately creating indigestion for 'smarter' shorts as well. The only winners were longs who jumped in during the mid-morning lull and bet 'black-' and who then closed positions at day's end. Even they are likely to experience seller's remorse on Monday, as the market continues to rally. Intrepid longs who decided instead to press their bets into Monday morning will likely endure an overnight selloff in Asia and/or Europe (not to mention an opening gap down) prior to cashing in their chips. That's my view from the La-Z-Boy.