Comes out of nowhere, doesn't it? Specialists gapped most stocks this morning. Take your pick on alibis. Greece, oil spills, etc. Neither has much genuine bearing on most stocks. Actually, SPY broke trend April 27th. Net advance/ decline line hasn't "advanced" since April 23rd. Volatility, as measured by a 20 day average true range on SPY bottomed on April 15th. Number of new highs peaked at 674 on April 26th and dwindled to 92 on April 28th and 252 yesterday.
A lot of shorters thought 2005 was a good time to short. they did. They cut their losses in 2007 and stopped trading. Then 2008 happened. Lesson: what the first guy said.
Seems the market is acting essentially like many experienced traders thought was likely, i.e., at least a pull back and more likely a correction, once we arrived at the 1200 area, in mid to late April to Mid to late May. The market has been signaling this with increasing volatility and a spasmodic look that often accompanies a toppy market while those who mistakingly see every dip as a chance to buy battle it out with those that want to sell in May and go away. Astute traders bought puts in the 1200 area to hedge their long positions if they didn't sell or go short. We should eventually go down some more until every one that will sell has done so. Once the profligate Greek, Spanish, Portuguese, and Italian spenders have their lines of credit arranged courtesy of those at more Northern latitudes, the US dollar should end its irrational rise fueled by the comparative weakness of the competing Euro. Afterward, federal spending will continue to inflate an artificially buoyed US market. As the frenzy of World cup soccer causes us to forget, or at least not care, that much of the world would be bankrupt were it not for fiat currency and Central Banker "magic", we will once again be ready to buy, but, buy. It seems unlikely the market will remain terribly weak into Fall with an election coming up and more stimulus money to be spent, so this Summer's correction may indeed be a nice opportunity to jump aboard the inflation train once again. All aboard, and "...to the moon, Alice." Those who continually warn of reality's ugly head rearing above the waves in a sea of happy rhetoric are wasting their time. Of course it will happen, but that could be years from now. Think of current market conditions as September's swoon being rescheduled for May and June at the convenience of those in Georgetown apartments.
Actually, I'd rather like this other one also by Sun Tzu: "Know your enemy and know yourself, find naught in fear for 100 battles. Know yourself but not your enemy, find level of loss and victory. Know thy enemy but not yourself, wallow in defeat every time."