Perhaps I’m growing paranoid, but the impression I have is that those not outright ignoring Unexpectedly LLC pay the most attention when the market is moving the direction they believe we want it to go, and that that direction is down.

I’ve said so several times here, but though I’ve been trading bearishly (and mostly unsuccessfully, as I’ve stated quite frankly here) for the majority of this rally (still the same one, kids, nothing new started last week, because the first rally never properly ended), I am not a bear, but a skeptic. For purposes of simplification and future linkage, I am now outlining this distinction in detail, and pretending that this is the Unexpectedly Corp. position.

First, the technical reasons I’m skeptical that this rally is the real deal:

  • Volume. Still sucks, never picked up, not last week, not in all 4 bloated months. In fact, after some very nice volume in March and early April, volume has declined. This is traders popping traders, and HFT/Program Bots popping us all, to the tune of as much as 73% of said metric.
  • No correction. In a bull market, correction is a normal part of short- and intermediate-term movement. Were this a new bull market, every dip would not need to be bought, nor would a couple of days in a row down make every bull in the land pull his apron up over his eyes and wail. We don’t go down because we can’t go down, because the longer we wait to go down, the greater the likelihood we go down hard, instead of just a bit. Best to keep on melting up.
  • Risk/Reward. While there have been plenty of great opportunities in plenty of great individual names on the long (and short, for that matter) sides, index movement since late April has been pretty range-bound. Sure, you can catch those tops and bottoms and play that range; I doubt as many traders have done so as claim to have. See the above point; each time we come down to the bottom of that range, the risk grows that we don’t hold it. Risking another 15, 20, 40% drop to gain the 10% or so available since late April just doesn’t make mathematical sense to Unexpectedly Labs.

But the vast majority of the Unexpectedly Holdings point of view–stop your ears, traders–is fundamental, macro, and (gasp!) a tad populist, and despite trading losses, some significant, owing to short-side trading that should have just been cash hand-sitting, it’s no time to dash into the fray just because a few days’ of charts say here we go again. Those of you who have are to be congratulated on your “rightness” or “good fortune”, however you choose to see it; those of you who will continue to do so are wished well, especially as a few more days of charts can always tell the exact opposite story. Very bad news and analysis, on everything from commercial real estate to European banking instability, is out there every day–today included–and ignored, or at least taken for granted. Until it isn’t.

It bears (hah!) mention here that this is not a trading blog. Sure, I link recaps and point you toward great trading analysis. But that space is overcrowded as it is, and for reasons that have more to do with quality of life than quality of greed or fear–U. Enterprises draws that line dark and thick, and never crosses it, since trading,  however engaging and artful a pursuit, is a poor excuse for productive work–the central preoccupation here has been, and will continue to be, what makes sense.

Past its initial stages, this rally has made none from these seats, except to the investor/trader class, institutional or individual, that continues to bid it up. It is a tractor beam for whatever average Americans’ wealth has yet to be destroyed in this massive cataclysm, and a tremendous source of short-term (and, some will later say, ill-gotten) profit for the two or three trading banks not put out of business by their own embracing of Risk Is Reward for the past decade, and therefore all the more to be avoided.

2008-2009 will be remembered for a number of narratives that have yet to fully emerge, and one of them, whose lineage can be traced from complex derivatives and mortgage securitization straight through to the burgeoning focus on HFT, is the divergence in intent between trading and investing, and the persistent mischaracterization of the former as the latter that has made dupes of a lot of people who wanted “above-average” return on their savings while they were too busy “working” “actual jobs” to go get it for themselves, and believed Wall Street existed to provide it. The Street has proven not to, perhaps now more than ever, and we believe this rally will ultimately prove to have been another privatized profit and another socialized loss.