New market angina surrounding Gary Cohn’s resignation late Tuesday is emblematic of the turmoil we’ve projected and seen since late January’s repeated call for a serious S&P breakdown; followed by periods of effort trying to reorient the market (whether or not it became a full Spring rally); but definitely in our view NOT a time for investment-grade commitment.

Essentially I warned that the market was low on fresh liquidity; growing increasingly dependent on leverage (or margin) to buoy stocks, and that aside trading moves (such as off-of the twin-bottoms in the S&P futures we believed were tradeable with ensuing rallies to be sold-into); there was no realistic justification for investment entry in the leading big stocks as were and are overpriced.
 

Sure some pundits were bullish yesterday; and this morning shouting at investors about how they need to get in; and then tonight probably will in a ‘rinse & repeat’ fashion, warn about how ‘everyone knew the markets’ were high and that if Cohn resigned the prospects of calm diminish. Or something like that. It amazes me because as we suggested upside Tuesday morning from the first sell-off, there were others trying to short it.

The S&P rallied. I agree about the markets overvaluation; but the swings are too violent to press the downside or the upside. That’s why intraday calls on Tuesday suggested the rebound (it took more than an hour to get going this time); but also suggested it would not penetrate resistance that developed; and that there was a shot at developing what technically is called a ‘head & shoulders’ formation as relates only to the post-crash rebounds over recent weeks. 

We sort of have that now. In fact in my pre-final-hour intraday comment I made a remark about uncertainty and who knows what happens over a given night; hence, rather clearly suggested any day-traders who bought the morning dip ideally should close those longs ‘now’ and go home flat. Good thing we had that in mind; look how the evening is going.