By Sell Puts
Guy 1: turns and says to guy 2: How is your morning/week been?
Guy 2: Actually not to bad, i know others in worse shape.
Guy 1: That is good to hear, i actually feel the same way. I talked with my buddy over at Lehman and man their issues make mine look like cake.
Guy 3: Yep, have a good one.I take this all in, i step out onto my floor. I never saw the people again. You know what happened next, Lehman filed BK September 15, 2008. After i heard this i did not think much of it, i just knew something was up because the markets were causing even the oldest and most experienced traders on my floor to get jumpy. Something was indeed up, this conversation helped instill confidence in myself that when we start going down, its not going to stop, it did not till 666.
Now for the real reason behind this article...Yesterday i was in the elevator heading to lunch and overhead two guys talking about the market, about halfway to the 19th floor a retailish looking guy said to his brokerish looking building buddy:
"What is our market doing?, broker says": Oh you know, grinding higher.. I have no idea whats going on, but people are making some money. Retail guy says, Things are starting to look up, if it keeps going up like this id be dumb not to jump in."
This little conversation gave me a lot of information about the thought process of the street. The first theme i picked up on was the street has a confidence in the trend "up", they are convinced their is manipulation going on but are ok with it. Neither of these individuals seemed to enthusiastic over the market going "up" but they did seem overly optimistic. Excessive optimism at this point tells me we could be topping out OR which is probably the real case, the hand of god has succeeded in convincing the American public problems are solved.
Perhaps the investing public will think the stock market is a way to solve financial problems, if they get a handsome return they are going to come back for more. I think a few retail investors have jumped into this market and saw very nice returns, who then told their buddies who then told their buddies.. so on and so forth. This may sound far fetched but this is how retail rallies start, you get fresh retail money chasing institutional money which is all front ran/ran with by day traders and prop shops.
This price action subsequently increases demand for stocks from the retail side. The fresh flood cash demands up the offers across the board further perpetuated by day traders flipping/churning. When the stock market becomes the highest returning "seemingly safe" investment vehicle of choice, liquidity should pick up greatly reducing violent intra day price spikes, kind of like we say today, SPY volume off about 40%.Volumes may remain short term lower compared to late 2008-2000, though longterm continue the crescendo of growth as time progresses. Listen in elevators, when in major financial centers.
