Toppy and Choppy

Since that blowout jobs number on July 3, we've been chopping around between SPX 1953 and 1983 for the past 2 weeks.  During that time, we've see some vicious moves in the overnight market, thanks to a newly vulnerable Europe and lack of bull catalysts.  We get another slap in the face gap down, coming after a similarly sized gap up yesterday.  These are no minor gap ups and gap downs.  There have been some chunky moves overnight, which tells me two things:  1) there are very few shorts left and very few willing to short.  2) value buyers are unwilling to step up at these levels.

SPX 2000 is a huge psychological barrier, and the consensus view is that the market is either fair valued or expensive.  I don't think anyone thinks this market is cheap.  So buying stocks is now a game of selling to the greater fool.  The value buyers are not going to be backstopping any dips from these levels.  It will have to come from underinvested fund managers or stock buybacks.  And stock buybacks have been waning this year, compared to last year.  Perhaps corporations don't want to push the envelope too far on leveraging up their balance sheets to buyback stocks.  Or they just don't see any value anymore in buying their overpriced stocks.

I am getting increasingly bearish here, and the bond market has been very strong despite almost hitting another new all time high yesterday.  And next week is post opex, usually a time of monthly weakness as there is less put protection.  Still not shorting, but shorting is increasingly looking attractive to me.  And not just for 5 or 10 point move, but for 30 or 40.