Wednesday, December 6, 2017

Back to the Cave

Ok, that was a nice little mid hibernation beef snack for this bear in hibernation.  I covered the short and back to flat.  I am not on an aggressive short prowl yet, and I wasn't even looking to short until the conditions were near perfect,and the good news big gap up on Senate tax bill passing was irresistible.  Unless there is a screaming short in SPX, I don't plan to revisit until January. 

I don't want to make a big deal out of the past 2 days, but it is days like Monday which give little hints that the top is near.  I don't recall so many traders getting so bulled up over something(tax cuts) that has been advertised for so long.  Earlier this year, I was waiting for the tax cuts to be priced in before I got aggressive on the short side.  The move over the last few days from SPX 2600 to 2660 went a long ways towards pricing in those tax cuts and getting investors excited about the market.  If you look at the TD Ameritrade Investors Index, a measure of how much buying the active traders there are doing, it is going parabolic.  A lot of investors on the fence jumped to the bull side in November.  It is at the highest level ever recorded, over the past 7 years.

Europe is back below the post French election levels seen in May, and China H Shares have gotten destroyed over the past 2 weeks, dropping 7 percent, going back down to September levels.  Also, for those looking at fundamentals, copper took a beating, as copper dropped 4.6% yesterday, the most in any day in 3 years! 

China is slowing, Europe looks like it can't handle a stronger euro, and yield curve continues to flatten.  2018 will be very interesting indeed.

Monday, December 4, 2017

Feeding the Ducks

Give them what they want.  More stock.  I am feeding the ducks this morning as we have hit an all time on the passage of the Senate tax bill and a retraction of the Flynn rumors by ABC News.  It was a massive move intraday on the release of the rumors that Flynn would testify against Trump, but the rumors weren't exactly correct, and it seems less likely to be the smoking gun to impeach Trump.

I couldn't really understand why it was such big news anyway.  The market is not going up because of Trump, it is going up because Republicans have control of the White House (regardless of impeachment, it just puts Pence in there) and Congress.  So even if Trump is impeached, there is still a Republican president.

Controlling the executive and legislative branch is powerful, because it allows for  unpopular bills to be passed with total disregard for the masses.  These tax cuts have been bought and paid for by the big time donors and lobbyists, and it has been a great investment for them.  There was no guarantee that a Republican was going to win in 2016, so they did take a small risk in giving so much money to Republicans.  But the lobbyists give to both parties, its not a tails I win, heads I lose situation.  It is more like tails I win a lot, heads I win a little.

Now that we have the good news mostly reflected in the market, it is time to get bolder on the short side.  I have been waiting patiently for this time to come, so I can start trading more actively.  This year has probably been the least I have traded intraday in futures in quite a while.  These slow years tend to set up very active years from past experience.  One of the key ingredients to getting more future volatility is having a market that is overvalued and well above its long term trend.

Friday's price action was a preview of the higher volatility that I think comes in 2018.  I have started a short at these pumped up levels this morning, and it is significantly bigger than the mistimed position I took last week.  Looking for a move back down to SPX 2625 this week.

Friday, December 1, 2017

Volatility Picks Up

It is not common to see the VIX rise so much with the market.  The VIX was trading as low as 9.5 on Tuesday and by Thursday, after 2 big up days, we are at VIX 11.3.  I see this as a sign that we are running on fumes for this rally.  With volatility a bigger part of portfolios, it has become a stronger indicator of future SPX direction.  Although there have been some stumbling blocks on the way to the Senate passing its tax bill, it looks like the holdout Republicans are saying yes, one by one.  Although with the very few deficit hawks out there, it looks like it will be watered down and scale back the corporate tax cuts sooner than expected. 

Will the tax cut bill passing be the sell the news top?  I don't think it will be that easy, but it will probably be the start of the topping process which should last several months, much like 2015.  I see a lot of parallels this year with 2014 from a rally duration and sentiment perspective.  Except the big difference is that the dollar was strengthening in 2014 and it is weakening now.  The USDJPY is quietly trading in a range that is below the highs set in 2015. 

It doesn't seem to make sense that the dollar is weakening as the Fed tightens and keeps its promise of 3 hikes this year.  Also, we are on the cusp of a tax cut which is supposed to boost US growth, which should be dollar positive.  But yet the dollar can't seem to go up.  What I see as a possible trigger for even further dollar weakness is the global economy actually weakening, which would force the Fed to stop its rate hikes, which would suddenly make dollar bulls turn into dollar bears.  Right now, we are still seeing a lot of disbelief that the euro is so high against the dollar even as the Fed keeps tightening. 

We are seeing more volatility in the S&P these last 2 days.  At turning points, you tend to see volatility rise, even at tops. I think we are close to one of those turning points.  Early December can still be weak for the stock market, so there is still a little bit of time for bears to go to work here. 

Wednesday, November 29, 2017

Shorted Too Early

Why did I even bother trying to play for a small pullback by shorting the top.  You had no post Thanksgiving hangover in the market.  Thanks to more feel good news on tax reform from the Senate, the S&P went straight up from the opening bell.  I still have a small short, but will look to get out before the end of the month. 

Fast Money crowd were raging bulls yesterday.  All the good news from Senate tax reform debates did its job.  With the extremely low put call ratios and the seasonal weakness for this week, it was worth a shot but the momentum is just too strong, and those with big gains seem reluctant to sell this year.  It feels like a toned down version of 1999.  Instead of retail being excited about stocks, it is the institutions.  Retail has flocked to bitcoin, the institutions have flocked to stocks. 

Eventually the shorts will get paid well, probably next summer, but timing the top is key.  It is very hard to stick with a losing position that will pay off big and suddenly.  In order to catch that sudden down move, you have be willing to hold a short position for the long run.  Not easy to do when long term shorts have been a one way ticket to the poor house. 

Don't see any long term signs of a top yet, but we sure are building a lot of air underneath.  It will make the volatility all the more crazy when the market goes back to trading a more reasonable valuation.

Monday, November 27, 2017

Bitcoin Shopping Spree

Bitcoin is the hottest item this holiday season.  It is the hardest to trade legitimately, but still the most popular among retail.  It figures that retail these days will flock to something that is anti-establishment, much in the way they flocked to Trump.  Of course, Trump didn't end up being anti-establishment, he is hyper-establishment, looking to give big business donors a huge gift in the form of tax "reform".

Socioeconomically, the underlying distrust of government and desire for alternative investments (the masses don't seem to have real enthusiasm for stocks anymore) has led to this dash for cybertrash.  You can't really compare this to the dotcom bubble or housing bubble.  At least there was some underlying value there, but cryptocurrencies have no real underlying value.  I am sure the bitcoin maniacs will argue with me on this, but unless governments give up their printing press in favor of bitcoin, it has no underlying value.  And what government would be dumb enough to give up one of their main sources of power to throw their monetary fate into bitcoin?

This really tops the cake among bubbles that I have seen.  You had stamps in the late 70s/early 80s, baseball cards in the late 80s/early 90s, and Beanie Babies in the late 90s, but this is on a global scale and larger.  At least for the above bubbles, there it at least some nostalgic/sentimental value for the asset, but that is absent with bitcoin.  It may be the closest thing to the tulip bubble.

Investing in bitcoin is not investing in block chain technology.  Block chain is a transaction mechanism, not an investment.  And the number of transactions that bitcoin can process is less than 5 per second, which makes it quite slow, compared to a VISA which can process more than 24000 transactions per second.  So that just makes bitcoin a store of value, which is not backed by any governments.  It is essentially competing with gold and silver, or even art and antiques, except it has no physical uses, which makes the value even more ethereal.

If I had to make a guess, it would be similar to gold, a weak dollar play, so a weakening US economy, and thus a more dovish Fed would help bitcoin sentiment, so I think there is another leg higher for this bubble in that case.

I am in no rush to short bitcoin because I do believe the dollar will get weaker over the next couple of years, and that could trigger another rush into bitcoin.  It will be interesting to see how bitcoin trades once futures trading is available on the CME and CBOE.  If the longer dated futures contracts have sufficient liquidity, I would be willing to take a long term short position in bitcoin sometime next year.

The seasonally strong period before Thanksgiving and Black Friday played out, and that sets a possible pullback this week.  I took a small short looking for a pullback this week.

Wednesday, November 22, 2017

Tax Cuts and a Weaker Dollar

The institutions are throwing caution to the wind and diving into risk.  In both stocks AND bonds.  When you have this much complacency and fearlessness, you see buyers of stocks and buyers of long bonds.  They don't want the shorter duration stuff anymore in fixed income, because the Fed is going to raise rates a bunch more times, flattening the yield curve, according to the "experts".

With bond, stock, commodity, and FX volatility so low, it encourages bigger positions in stocks and bonds.  The best way to get a big position in bonds is to go for the 30 year bond, the biggest bang for your buck.  The best way to get a big position in stocks is to go for Nasdaq stocks, also the biggest bang for your buck.  The S&P is at 2600!  Who would have expected that with revenue growth at 5%? Of course, US corporate profit margins are at all time highs and those who said it was mean reverting are saying its different this time.  This is due to quasi monopolies in existence in the US, thanks to the big corporations lobbying on Capitol Hill to extend and expand patents, keep competition to a minimum, etc.

And now you have the big time corporate tax cuts coming down the pike, which seems to be unpopular among those who actually have seen the proposals, which is a small minority, of course.  This should help corporations expand their profit margins further, at expense of a weaker dollar.  Yes, a weaker dollar.  Fiscal stimulus that lead to higher deficits with limited economic impact are dollar negative, not positive.  And this tax cut will just be another way for corporations to expand their stock buyback programs.  With individuals getting very small tax cuts, it provides limited economic stimulus.

The Republicans have deftly crammed down a very business friendly bill, at the expense of the value of the dollar, because the Fed will end up printing the money to pay for the deficits anyway to keep the Treasury's interest rates low.  If Japan can do it, for sure the US can do it with the world's reserve currency and a Fed that is a slave to financial markets.

If you follow the most likely course of events over the next 5 years, it is as follows:   You will have massive budget deficits, thanks to an aging population which raises Medicare and Social Security spending, and of course, the Trump tax cuts.  The proposal appears to have a giant loophole for individuals to incorporate themselves in order to benefit from the lower business tax rates for S corps and LLCs.  So the deficit will likely go up a lot more than projected.  Of course, the deficits which will be funded by Treasuries, will eventually be financed by Fed QE, when there is the slightest downtick in the economy.  And when Fed starts cutting rates again, the dollar will get destroyed and you have 2010 to 2012 all over again, as the Eurozone can't handle a strong euro.

Back to the current market.  It is a pig of a stock market.  There is no value.  It is what it is.  I am looking at a possible small short for Friday, as CNBC Fast Money seemed wildly bullish.  And is usually a sign that upside is limited.

But during this time of year, you may get a slight pullback in late November, early December, but that is about it.  You almost never see weakness starting from mid December to year end.  So if you want to short, you want to keep it short term, and the pullbacks will be small.  Next year will be the time to get aggressive on shorts, not now.  Tops usually last a long time, so the opportunity to short at high prices will be there for a while.  No rush.

Wednesday, November 15, 2017

Questioning the Effect of QE

The ECB will reduce their QE to 30 billion euro starting next year, and there are rumblings about the potential effect of central banks pulling back stimulus in 2018.  Unlike other investors, what is more of a dark cloud on the equity market is the high valuations relative to the growth rates. This overvaluation is conveniently rationalized by low interest rates, which is easily debunked when you compare the valuations of Europe and Japan versus the US.  If low interest rates are the reason for a higher multiple, then how come NIRP Europe and ZIRP Japan are priced cheaper in all valuation metrics compared to PIRP US? 

The light blue line is the S&P 500, the dark blue line is Eurostoxx 50.  Since March 9, 2015, when ECB QE started, the S&P has outperformed the Eurostoxx, 25.2% to 8.4%.  While the US was tapering and tightening, the ECB was pumping out 60 billion euro per month, and Europe still can't outperform the US.  So maybe QE isn't the end all, be all for the stock market. 

When investors can't understand why stocks are going up, the most convenient rationale is the expanding balance sheet of the global central banks.  Not many people question this belief, even though the divergence in US and European equity performance since ECB QE simply doesn't support the case. 

This brings me back to the current market.  Europe has been getting pummeled in November.  I guess there is no positive seasonality in that market.  The US has tried hard to ignore the scarecrow European market, going up on gap down opens for 2 straight sessions.  Today will market another day of a healthy gap down thanks to Europe.  Europe has usually been a good forecaster of future US performance, so this European weakness should foreshadow future weakness in the US. 

Perhaps the long awaited 3% correction comes after Thanksgiving, since the US doesn't like to selloff ahead of that festive time period.  So expect the market to stabilize soon, as Europe is approaching strong support levels in the Eurostoxx made post French election and late September, just above 3500.  S&P should stay above 2550, but be capped under 2600 till Thanksgiving. 

Sentiment wise, it feels a lot like fall of 2014, after the market V bottomed in mid October, and went straight up till end of November.  That was the last time I have seen this kind of exuberance and complacency for equities.  Investors spent much of 2013 and 2014 getting max exposure to equities, as the market complacency finally kicked in the internal greed algo.  Same as post November 2016.  I can picture a 2018 that will be an even uglier version of 2015, purely due to the extent of the overvaluation.  Remember, the higher they go, the harder they fall. 

Monday, November 13, 2017

Bonds and Stocks Going Down Together

An interesting thing happened on Thursday and Friday last week, which hasn't been common this year.  Both the stock market and bond market sold off.  While the drop in stocks isn't that much, the VIX has gotten perkier, going above 11.  The selloff in bonds wasn't trivial, the 30 year sold off 11 bps in 2 days, which is a large move these days. 

Bonds and stocks going up together is quite common, and so are stocks going down and bonds going up, or stocks going up and bonds going down, but both stocks and bonds going down is pretty rare.  I don't have the numbers this year, but I don't recall bonds going down this hard while stocks were also down.  In 2015, both bonds and stocks going down together was more common, as stocks topped out ahead a vicious correction in August-September, and then again in January 2016. 

Just another straw on the camel's (bull's?) back. 

We have VIX trading higher again this morning, and with the S&P hardly down on the day.  The long side seems saturated and the VIX sellers are feeling some pressure.  There is subtle sell pressure across asset markets, and this is something new for this market. 

On a side note, with CME announcing they will be introducing bitcoin futures later this year, I have noticed the extreme volatility over the past few days.  It reminds me of the volatility in late 1999 of the dotcom bubble.  Also the talk on social media has changed from calling it an outright bubble this summer, to more of an acceptance/belief of blockchain as a revolutionary technology.  Seems like bitcoin too is nearing its final legs of a bull market, although I do believe it will top out after the S&P, not before it. 

Thursday, November 9, 2017

Don't Ask Don't Tell Gap Down

These are the most powerful gap downs.  When no one knows why it's going down.  And in premarket, of all times.  Usually you are getting the no news moves higher in premarket, not this.  Don't ask, don't tell.

For the first time in months, I am seeing signs of buyer exhaustion as the Russell 2000 continues lower while the S&P continues higher.  The Russell finally couldn't keep it together and cracked on Tuesday, going down 1%.  A 1% move in any US stock indices is considered a big move now.  We are in that kind of low volatility grind. 

This week, the calm in the S&P has masked a Eurostoxx that is starting to lag, even with a weaker euro, continued lagging breadth in the US indices, as the leadership is becoming thinner.  And now this, a gap down for no reason. 

By the way, isn't tax reform supposed to be that great catalyst for another move higher?  Well, clearly the market doesn't think that there will be any significant growth boost from the package, as bonds rallied after last week's announcement, even as the S&P was grinding higher.  The flattening yield curve, as the 5-30 spread has gone below 80 bps, shows skepticism about future growth, as well as the ample liquidity out there in fixed income.  The money has to go somewhere.  And usually its either stocks and bonds.  And with stocks at these levels, there is a lot of money that needs to go to bonds to make a more balanced asset allocation. 

The equity fund flows are also flashing a warning sign, as October had heavy inflows.  It is feeling like the topping process has begun, and we should have a hard time rallying much more from here.  The only fly in the ointment is seasonal positive time period of November and December, which is amplified by the incentives to postpone capital gains due to possible tax cuts for 2018.  So while the topping process has probably begun, it should take a few months before we go down the mountain.  The bear suit has gathered enough dust, I will have to dust it off and put it on soon.

Monday, November 6, 2017

Heavy into Equities

Retail is heavily overweight equities.  The Fed issues a quarterly review of the financial accounts of United States which includes flow of funds and the levels of financial assets and liabilities for households.  The numbers surprised me.  I bought into the belief that more money flowing into bond funds and out of stock funds since 2008 was a rebalancing by households as stocks went higher.  But it pales in comparison to the amount that equities have rallied compared to fixed income.  It really has been a TINA market, There Is No Alternative.

In essence, for retail, as of 2017 Q2, they are holding more in equities ($16.9 trillion ) than checking, savings and money market funds ($1.1 + $9.1 + $1 trillion) and bonds ($3.9 trillion) combined.  For reference, in 2009 Q4, they held $7.2 trillion in equities, $0.9 trillion in checking, $6.7 trillion in savings, and $1.4 trillion in money market funds, and $4.6 trillion in bonds.  Basically, households have more than doubled their allocation to equities while reducing their allocation to bonds over the past 8 years.

What is interesting is that even at the peak in the S&P in 2007, household equities holdings was still at $6.1 trillion, which is less than at the end of 2009 ($7.2 trillion), when the S&P was much lower.  So it has been a long term trend of households rebalancing towards more equities and less fixed income over the past 10 years, regardless of what the stock market has done.

This runs counter to the claim that this is the most hated bull market in history.  The flow of funds is speaking loudly, and it is overweight stocks.

We have hit another new high today.  It's another day, another new high.  VIX is below 10, so no need to start looking for a top.  I will not try to pick a top and go short unless I see more volatility.  This is a nightmare market for shorts, and a pretty bad market for traders.  It is heavenly for buy and hold investors.  The trader's time to shine will eventually come.  Make sure you are one of the traders left with sufficient capital to take advantage of the other side of the mountain.  That is why I am doing very little here, especially in S&P.  I see a few opportunities here and there in other markets, but nothing to get excited about.

Monday, October 30, 2017

Fed Chair

The market has been waiting for Trump's Fed chairman nomination and the suspense was building up until Friday, when a trial balloon seems to have made it almost a lock that Jerome Powell becomes the next Fed chair.  Trump got what he wanted with the Powell trial balloon.  The stock market rallied strongly as did the bond market.  I am sure Mnuchin will be in Trump's ear telling him Taylor as Fed chairman will tank the stock market. 

Powell is a low interest rate guy, someone who follows orders, and I am sure Trump has asked him for a pledge to keep interest rates low if he were to be Fed chairman.  Unlike Taylor, Powell seems more interested than Taylor in playing politics and strategically being dovish to increase his chances of getting future government and corporate gigs.  That's why he was basically a yes man to Bernanke and Yellen.  That is why Neel Kashkari has taken the strategy of being the dovish outlier, the crazy dove who thinks rates should be lower in the face of near consensus rate hikes, complaining about the lack of inflation.  That is how he is able to get himself into the conversation for Fed chair nominee even though he's only joined the Fed board recently. 

By the way, on inflation, and the Fed still looking for that 2% inflation rate.  Well, good luck with that, because it is clear as day that the CPI and PCE inflation numbers have been so manipulated to the point that it can really only spit out low inflation readings unless there is hyperinflation.  Hedonic pricing, substitution, and "new" valued added features compensating for higher prices of goods, etc.  It was comical in the middle of  2008 to see the government pump out low single digit % CPI numbers as the dollar weakened against everything, corn went from $3.50 to $7.50/bushel, and oil went from $50/barrel to $147/barrel from 2007 to mid 2008. 

Anyway, the Fed chairman job, if Trump is looking for someone who will obey his commands and keep interest rates low, Powell is his guy. 

On Friday, we took a page out of 1999 and got a huge surge in the high flying big cap Nasdaq names, while the rest of the market was doing nothing.  It is a bubble, but there are so few of those high growth stocks remaining in this market that the supply just can't meet the demand unless prices go higher.  Even at these levels. 

Hoping (however, not expecting it) we could maybe get a sustained VIX rise for once, but it petered out again after the Powell rumors and Nasdaq surge on Friday.  Back to the same old low VIX grind. Again.

Thursday, October 26, 2017

Worried About Rates

Now we see Fast Money bring up the bond market excuse for stock market weakness.  This often happens late in a down move for bonds, as those who usually don't care about that market suddenly get interested, almost like passers by who stare  at two people yelling and pushing each other, and about ready to start a fist fight.

You've got to have a long term fundamental basis for your trades if you really want to be able to hold on through the volatility and drawdowns.  The current levels for bonds are quite compelling from a long term view.  I don't believe the global economy can take much higher rates, which means that rates can't go up much before the stock market has a tantrum, and in a circular loop, that will keep rates low.

But we live in a short term driven hedge fund world, so the short term price action can run counter to your long term view, even though the view is still valid.  While you are seeing stronger economic data recently, a lot of it is based on rebound effects from the 2016 slowdown, and the extra confidence boost provided by a rising stock market.

You cannot rule out the bubble expanding, especially since volatility is still low and it doesn't appear like we have topped out.  But longer term, beyond the next few months, into the next few years, you are looking at future stock market weakness, that could persist for quite some time.  The valuation levels just are too high for this type of earnings growth.  You are looking at a demographic headwind of Japan, Europe, and U.S. getting older, with many retiring and reducing consumption.  That is a powerful headwind that could only be held back by massive amounts of global QE, and that was just to keep the developed economies growing at low single digits.

At an S&P of 2560+, you are pricing a continuation of the past 5 years of steady growth because of low interest rates.  Yes, the monetary policy will be easy in the future and interest rates will probably stay low, but the market has gotten used to low rates, and priced it in, so that's not a positive catalyst anymore going forward.  Monetary stimulus works because you are changing conditions by making them easier, not by keeping them easy.  So just keeping rates low will not stimulate anything.  You will have to have growth, for stocks to keep going higher from these levels, and that will be harder to come by in the future.

Short term, this a hard market to trade, although buying intraday dips like yesterday usually works, at least until the dips become more frequent, in which case, the dips become more dangerous to buy.  We are not at that point yet, but a few more intraday down days like yesterday in the near future, and you will likely see that weakness go all the way to the market close.

Thursday, October 19, 2017

Waves from China

The trigger for the gap down today is the late day selloff in Hong Kong.  It is no coincidence that the last time we had meaningful sustained selling was on worries about China.  Hong Kong is basically a proxy market for foreigners to trade China.  We are just back to levels of last week, so this is nothing meaningful, but it does show you that the weak point for global equities markets remains in China, so that is where you have to look for signs of weakness. 

The top is a while away, and you will have these "scary" gap down days, this just happens to be on the 30th anniversary of the Oct 19 1987 crash.  So it puts a look of extra psychological pressure on stock holders today.  If we bounce right back within a couple of days, which I expect, then this down day only confirms future strength.  However, if we can sustain selling for more than a couple of days, then this market is giving us something to think about, which could be significant or not. 

The positive seasonality is hard to fight with the lack of volatility and persistent strength.  November is historically a strong month, and it is also the heaviest time for corporate stock buybacks, so definitely a tailwind for this market after earnings season is over. 

Not only is the stock volatility really low, so is bond volatility.  The MOVE index is hugging the lows for the year, even though rates have been trending higher over the past several weeks.  Usually, bond volatility tends to rise with rates.  It seems the bond market isn't too scared of a Fed determined to hike in December or a more hawkish Fed chairman.  That is basically the story of the year.  No fear and no action.

Monday, October 16, 2017

Grind Can Last a While

It is not at all unusual for the market to grind higher like this for several weeks in row, or even several months in a row.  It happened for nearly 12 months straight, with one brief interruption (in late Feb 2007), from August 2006 to July 2007.  It was a regular feature of the powerful bull market in the mid 1990s.  It just hasn't really happened since 2008, even with an 8 year old bull market.  You had regular meaningful dips from 2009 to 2016, which would scare out those who had 2008 flashbacks, only to V bottom higher.  This year, you had a few shallow dips, almost as if the dip buyers were so thick that they stopped the dips from getting deep.

It is the triumph of the dip buyers.  They have won. They have been so successful that the dips are now so shallow and brief, that even a 3% correction looks like a monster buying opportunity. 

When does it end?  You want to see a VIX that is rising when the S&P is rising.  That is the first and biggest clue.  You want to see less inflows into bond funds and more inflows into stock funds.  And you want to see China's markets do worse, because they often foretell broader global stock market weakness. 

It is a grind these days, and there is not much new to add.  I don't want to repeat myself, but the top is months away, so either be long (if you can ride bubbles) or in cash.  Just don't be short. 

By the way, I will be writing fewer posts with the lack of action.  If things pick up, I will write more.

Wednesday, October 11, 2017

On their A-Game

They are on their A-game.  I am talking about fund managers.  It is easy to not make big mistakes when you are making money.  An equity market at all time highs and a bond market that is stable is about as ideal an investing environment for institutions.  They will not do anything rash under these conditions. 

While you can question their long term positioning, in the short term, they are not making the mistake of puking out positions on a short term dip, because they have learned their lesson.  They realize it is a loser's game to set tight stops and regularly get stopped out, only to see the market reverse right away and go higher. 

It is a lot like poker players, when they are making money, they play more optimally and make better bet, call, and fold decisions.  There is no feeling of desperation to make their money back, so they can play more calmly and without need.  Usually those that are losing money start to play more hands, try to win more pots, and go on tilt.

Right now, the players in the game are making money, and not making any short term mistakes.  To try to make short term money in this market is like trying to squeeze blood out of a rock.  I would rather just play high stakes poker.  At least that game is more interesting than trading this market.

Here is the thing about playing the money game.  You have to want it, but not need it.  Those that can trade without a need to make money can play the long game, looking out months and years ahead.  Getting caught up in the day to day market action can often prevent one from catching the longer term opportunities.  That is where the real money is.