A Very Patient Buying Frenzy

Today stocks continued ripping higher with nary a limit order standing in their way.  While the FED stated yesterday they will remain patient, investors were anything but patient, and invoked a buying frenzy that concluded in an "inverted flash crash".  The $SPY, an ETF that tracks the S&P 500, hit $212.97 into the close.... a full $5 more than the offer.   It's akin to telling the cashier you'll happily pay double for a pair of shoes for absolutely no reason.  Then again shoes cost $50, these trades were over $200 million.  I guess if you are 100% sure the $SPY is going over $213 why buy at the current price.... if that makes any sense (it doesn't)

The trade was rubber stamped and other than the odd wick on the chart, we probably won't hear anything else about it.  We can speculate all we want about who made that trade, but I'm not sure what good it does to focus too much energy on it.  We already know the computers are running wild.  The trades are telling you that at anytime you can expect your limit orders that are 3% above the ask to get hit...so set those limits.

When stocks plummet for absolutely no reason its all over the news, but unusual trades that bring stocks higher, its a good thing... and in reality it is, because higher stocks, rising on the heels of Central bank moves are bullish for the economy.... right?

If anything it was an appropriate exclamation point on a ridiculously bullish day that followed yesterdays ridiculously bullish day.  The stock market under the Janet Yellen FED has proved to be quite resilient and shown incredible rallies off over sold conditions.  The now infamous "V" bottoms continue to astound.  It is a lot like Pavlov's dog.  The buy the dip mentality is firmly entrenched after years of countless rallies after brief dips.  

To think we are only a few days removed from some pretty nasty selling and a mere two days later we peg a new record high on the $SPY.

As long as Central Banks around the globe continue to support risk assets, we are going to see big candles and unexplained moves to the upside.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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