Banana Delivery

We got the bananas out on time.  And more than expected.  And unlimited.  Apparently there were quite a few who were caught flat footed by this QE3, otherwise we wouldn't have had such a sharp rally on something that was imminent and hinted at over and over.  Now what?  The knee jerk reaction is to sell the dollar, buy gold, oil, other hard assets, and stocks.  Timing tops are more difficult than timing bottoms.  You don't have that crap in your pants moment like you do at bottoms.  Instead the market lingers near the highs, consolidates with increasing volatility, and suddenly goes lower.  The length of the consolidation is hard to time, but it should start next week, where we'll likely trade in a range for a few days, get traders used to these prices, more comfortable buying stocks at these prices, and then the next catalyst will be eyed. 

The X factor is the hedge funds, how will they trade the remainder of the year?  Will they chase longs and try to catch up with the S&P and risk buying at the top and going negative on the year?  Or will they play it safe and try not to have a disaster of a year (i.e. going negative when the market is up so much)?  My bet is that most will go with option 2, and just try to survive this year, and be safe in the company of the mass of underperforming, but still positive on year hedge funds.  Without hedge funds chasing this market higher, I don't see us going much above current levels.  The retail crowd and insiders are not likely to be buying. 

Gut tells me that the dip buyers will keep the market from plunging anytime soon, but the extent of the rally on anticipation of central bank news means more volatile times ahead.  I don't see a crash, those only happen in an environment of financial panic, and that doesn't happen anymore with activist central banks.  Instead, we'll likely get a grinding move lower that will be punctuacted with sharp, fleeting countertrend rallies based on central bank "news".