MOMO

Good Morning. Yesterday's market headlines from the biggest of the big news websites read: "Stocks Finish at Five Month Highs," "Stocks Notch Another Win," and "Banks Lead Rally." All of which would seem to indicate that the bulls are on a roll right now. And while I think our Market Wrap headline, "Bulls Breakout But Momentum Lacking" may have been a bit more accurate, a picture of the Wall Street bull did indeed adorn the article.

My trusty spreadsheets also tell me that there is no doubt about it; our heroes in horns are winning the game so far in 2012. Stocks were up nicely on Monday, are up on the year, and did finish at the best levels since the summer smashing. Assuming the formulas are still correct, the Dow Jones Industrial Average is up +2.00% so far on the year, the S&P 500 has advanced +2.74%, Smallcaps have increased +3.42%, and the NASDAQ is up +3.74%. Not bad, not bad at all.

So why then are so many of my colleagues (people in the business of investing) frustrated these days? Why am I taking calls and explaining the bull case? And why are so many folks complaining about the current trend - especially when these same folks are basically in the bull camp? While I could certainly be wrong, my thinking is that the dissatisfaction with the market is due to the new trend of the market's trend.

Upon further examination of the calls I took yesterday, it occurred to me that while each was, to a caller, bullish, they were also all looking to add long exposure to their portfolios. And in short, there have been few opportunities to do so this year as the point moves seen in the indices have almost all come before the open. Sure, there have been some dips to be bought. But if you were buying at the open on the "good days," you were generally disappointed by the close.

Yes, I know, this is exceptionally short-sided thinking. However, I do find it odd that the stock market's gains are now occurring when the stock market itself is closed. So, unless you are awake at 2:00 am and can click a mouse faster than a computer can execute a trade instruction, you can't get in on these moves. In fact, the trend of the new trends is that the market actually trends lower after the initial joyride to the upside at the open.

My question is where is the follow-through? Or perhaps put more accurately, where are the buyers once the opening bell rings? Why are traders selling into the advances? And finally, is this really the new trend?

My working theory is that the new trend in trends isn't likely to last and can be attributed to the overtly negative macro view amongst so many of the big hedge funds. According to research report from International Strategy & Investment Group, their proprietary gauge of bullishness within the hedge fund community remains at the lowest level since 2009. The report shows that hedge funds, which had a horrible year in 2011, continue to cut their exposure to equities, likely in response to the dour macro outlook in Europe. And although these are supposed to be the most nimble investors around, the hedgies haven't increased their long exposure since the October low.

Thus, I believe it is safe to assume that the intraday selling we've been seeing this year is coming from those folks with a less-than optimistic macro view of the investment world. The good news is that the bulls have been able to prevail thus far. And then the even better news is that if the nattering nabobs of negativism were to find a reason to see that there actually is water in the glass, we might have one heck of a ride to the upside.

So, as someone who is leaning long at the present time, here's to hoping that the new trend in trends doesn't catch on