One Direction

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No, not the Boy Band but rather the major market indices.

It has been a wildly, beautifully bullish market ramp in the traditional time of year, from November 15 through the January option expiration. Overall index volatility is at decade lows. NYSE market breadth is at all time highs. There is talk not of “green shoots” but rather “economic stability” combined with the worldwide stimulus of trillions of dollars, euros and yen pumped into financial assets over the next year.

We have reached the place where the Central Bankers have sought to lead us: “Controlled Market Nirvana.”

Sure, there will be large individual stock movement. But individual stock volatility has replaced overall market volatility as measured by VIX. Even the thought of a “great rotation” out of bonds and into stocks has banks, brokerage firms, mutual fund companies and shareholders drooling with anticipation and delight.

Normally I would forecast a real pullback about now as earnings may not have been managed down low enough to be beaten . But today both IBM & GOOG have beaten slightly and are rising very sharply.

Maybe this year, the prospect of no end to the QE billions each and every month will reshape the calculus by preventing the normal ebb & flow of market phases. There has been some internal deterioration but it has not mattered, and the SPX is less than 100 points from its all time highs while both the Russell 2000 and the Dow Transports have already reached all time highs.

I expect there will be some tempering of the strong and steady swing to overall bullishness but that the corrective action won’t be severe or significant. In fact, it will be viewed as a buying opportunity.

I struggle to find new, cheap buys. I am not amenable to follow the momentum buying. Shorting is rare. While this phase may last “a while” it is the phase that requires full acceptance of the “greater fool theory”. Sure, prices will rise even after the markets have doubled and there will be buyers, but only because there is buying. There is no “value”, only the hope for higher price. And it can endure longer than your logic or confidence in analysis can stay solvent.

 

4 Responses to “One Direction”

  1. The stocks you buy when they are cheap, SO CHEAP – once they have climbed and are no longer cheap, will you still hold them through momentum rallies?

Comments are closed.
Previous Posts by Scott Bleier

One Direction

455 views

No, not the Boy Band but rather the major market indices.

It has been a wildly, beautifully bullish market ramp in the traditional time of year, from November 15 through the January option expiration. Overall index volatility is at decade lows. NYSE market breadth is at all time highs. There is talk not of “green shoots” but rather “economic stability” combined with the worldwide stimulus of trillions of dollars, euros and yen pumped into financial assets over the next year.

We have reached the place where the Central Bankers have sought to lead us: “Controlled Market Nirvana.”

Sure, there will be large individual stock movement. But individual stock volatility has replaced overall market volatility as measured by VIX. Even the thought of a “great rotation” out of bonds and into stocks has banks, brokerage firms, mutual fund companies and shareholders drooling with anticipation and delight.

Normally I would forecast a real pullback about now as earnings may not have been managed down low enough to be beaten . But today both IBM & GOOG have beaten slightly and are rising very sharply.

Maybe this year, the prospect of no end to the QE billions each and every month will reshape the calculus by preventing the normal ebb & flow of market phases. There has been some internal deterioration but it has not mattered, and the SPX is less than 100 points from its all time highs while both the Russell 2000 and the Dow Transports have already reached all time highs.

I expect there will be some tempering of the strong and steady swing to overall bullishness but that the corrective action won’t be severe or significant. In fact, it will be viewed as a buying opportunity.

I struggle to find new, cheap buys. I am not amenable to follow the momentum buying. Shorting is rare. While this phase may last “a while” it is the phase that requires full acceptance of the “greater fool theory”. Sure, prices will rise even after the markets have doubled and there will be buyers, but only because there is buying. There is no “value”, only the hope for higher price. And it can endure longer than your logic or confidence in analysis can stay solvent.

 

4 Responses to “One Direction”

  1. The stocks you buy when they are cheap, SO CHEAP – once they have climbed and are no longer cheap, will you still hold them through momentum rallies?

Comments are closed.