Why This Rally Is a Head-Fake

You are hearing a lot of talk in the financial media regarding this rally. Is it just a bounce? Is there a bigger correction to come, will we re-test the recent lows, or will this rally extend and take out the 2011 highs. The fund managers who are on CNBC, Bloomberg and Fox etc are there as salesmen to sell a product. They want your retirement/investment dollars for them its always a bull market, they are never going to tell to to stop sending them money. Why would they, for them its all about buy and hold, and finding value, BLAH BLAH BLAH. Anyway!

I took a look at this move that started on March 17th and tried to find something, anything that would give me a hint (or edge) as to what the future may bring. So I took a look at the internals of the September, and December rallies in 2010. If you remember back then we had a lot of uncertainty and the markets had sold off and things looked awful and we had huge rallies that extended the bull market (or so called bull market).

Taking a look inside the market (breadth) numbers of those rallies (9&12 2010) the advancers out numbered the decliners by 2:1. The average daily dollars coming in to the advancing SPX issues in Sept. was 184 million and the average dollars on declining issues was 148 million/d. In December the number were 210 and 185 respectively. In Sept. the average shares traded in advancing issues was 6.4 million and 5.8 in declining issues. In December the numbers were even better, 9.5 mil in advancing and 5.9 mil in declining issues.

This 2011 rallies internals show almost 2:1 advancers over decliners but average daily dollars coming in to the advancing SPX issues is 201 mil/d, average dollars on declining issues 246 mil/d. The average shares traded in advancing issues 6 mil/d and 10.4 million in declining issues.

So to me this looks like a sucker rally, the smart money is heading out the door and once again the little guy will get left holding this bag. Do your own homework you can find all this data online. I'm waiting on a break of the 50dma before I short.