Bear Worries

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Weeks ago, as we approached the fiscal cliff circus, I seriously thought we would have a repeat of what happened last summer. At that time, during the "prequel" to this fiscal cliff debate, the S&P 500 plunged nearly 20% in a mere twelve trading days, virtually without a pause (it brings a tear to my eye just to think of it; our friends at ZeroHedge have put together an interesting analog between the two).

The current market seems to love the fiscal cliff. It can't get enough of all these press conferences, horse-trading, and tit-for-tat. Stocks have been thrusting higher almost without interruption since the morning of November 16th. It's just another in a long, long series of disappointments over the past four years.

So I wanted to put a few bullets into the bearish argument, just for the sake of balance. Plenty of predictions in the world of financial pundidtry go wrong (just look at my SocialTrade stack of Prediction Fails for a sampling.) I've certainly given my fair share of predictions that failed to pan out. So let's take a few swipes at the apparently ludicrous notion that the stock market is going to fall anytime in our natural lifetimes.


First is the ES, which broke above its descending trendline today and has wrecked its series of lower highs.

1218-ESBREAK

The Dow Transports have performed a similar act of carnage-making:

1218-TRAN

As I stated in a post earlier on Tuesday, the Euro seems to be in breakout mode. A huge cup with handle is complete, so I guess all of Europe's problems are put to bed (or at least are perceived as less severe than those of the United States).

1218-EUR

The formerly-beautiful diamond pattern in the NZD/USD has been laid waste.

1218-NZD

 

And, importantly, the resistance line in the Dow Jones Composite has been pierced and just today took on some serious damage.

1218-COMP

Apple-powered NASDAQ blew past both its resistance trendline and the horizontal line defining its topping pattern from earlier this Autumn.

1218-COMPQ

I have continued to trim my risk, having retreated to a mere 38% commitment with the other 62% in cash. I have no large positions at all, and it seems the notion of the fiscal cliff providing a catalyst to a tumble is fading with the sunset.

For those bears who are ready to abandon all hope, I offer you this one gift. Today, the LDI offered up a new signal: "I borrowed some more money today to add to my SPY long call position." This alone may render all the above charts harmless.

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