A trading friend of mine wrote me an email over the weekend, which he said I could post. I think it’s an interesting perspective; if you have other good arguments for either side, leave them in the comments section………..
Pro Bear thoughts:
1. We are now starting week 95 without a test of the 55 week moving average. We broke the 1998 record of 93 weeks which resulted in a 22% correction. Only two records left to beat is 1987 and 1929. We are still 36-39 weeks away from that madness, respectively. God help us all if we break those records.
2. Month 66 of a 64 month cycle
3. High Yield bond sell off
4. Hard asset sell off
5. Hard breaks of long term trend lines dating back to 2009.
6. Record bullishness
7. Record margin debt.
8. More geopolitical risks in years.
9. Record valuations in relation to GDP
10. Record buybacks hiding true EPS.
11. QE ending. Even though this has been known for 10 months, the market hasn’t sobered up to the fact and nothing of the sort is priced in.
12. Rate increases.
13. Larger daily ranges.
14. A sell the rally phenomena change from BTFD all summer.
Pro Bull thoughts:
1. It is entirely possible that we break the 1987 and 1929 record of 131 and 134 weeks without a test of the 55 week ma. Why not? Record influx of liquidity can do a thing like that.
2. Bubbles don’t roll over peacefully and die. Looking for a huge rally before it violently dies. Similar how CYNK lived and died.
3. The “correction” in 2011 may be considered a bear market and may have reset the 64 month cycle. Meaning, we may have a few more YEARS of this madness.
4. Possible rigged market. Phantom secret buying. More than officially announced. Including QE to foreign countries. I really hope this is not the case for the hope of all that is good and genuine. #audittheFed Trust but verify.
5. Transparent dovish Fed announcing QE4.
6. QE 3 ending is fully priced in.
7. The Fed actually discovered the perfect recipe for permanent wealth with no inflation. Or at least a system that can last another 10 years.