All the world loves a lover, and all the world hates a bear. It’s never easy being the ursine type in this world, but I’m truly starting to believe that it’s worse than ever. For approaching five years now, the central bankers of the world have succeeded in snuffing bears out of existence, one by one. And during the few times that it seemed there would be hope, the amount of time it takes to turn things around again gets shorter and shorter.
This most recent example is a good one, and it illustrates nicely how the length of time for any down market is getting comically brief. We shed about 1,000 Dow points between late May and late June, but whoomp, those losses have been largely undone, and in some cases, indexes are reaching the highest points seen in the history of the universe (like, say, the Russell 2000).
Even such gigantic market forces as the Euro aren’t able to coax stocks lower. Below is a chart showing the S&P (in blue) and the Euro (in black). It wasn’t that long ago a collapsing Euro would have dragged stocks down too. Just take a look at the spread now. Equities couldn’t give a flying crap that the Euro is free-falling.
The Russell is spitting distance from its upper trendline. What’s also distressing is that even times that the Russell has sold off, it didn’t even come close to meeting its lower trendline. There’s simply too much strength.
I think tomorrow (Wednesday) is pretty much the last chance for bears. If the Fed minutes come out, and the market continues to rally, I think it’s clear that equities have told Tapering to go and shove it. One wispy possibility is that, as in 2007, the lower high following a lifetime high marks an important, long-term turning point in the market. As disappointed as I’ve been over the years, I’m not counting on it.
If I sound down, it’s because I am. The market is in la-la land again, and just moments ago I saw a headline story featured on Yahoo from a prominent blogger stating the “Valuations Don’t Matter.” This bubble has gotten gigantic, and the thing with bubbles is that you never know if you’re one day or three years away from the time it finally, at long last, starts to deflate.