Friday, February 13, 2015

All Time High Again

My forecast for the year has not changed.  This is the year where the bull market turns into a bear market.  As the days go by, the stronger I feel about the end of this 6 year bull run.  Wouldn't it be neat to have the bull market top out on the 6 year anniversary of the 2009 bottom on March 6?

The breadth has been terrible despite going up steadily this week.  The market doesn't go down on really big volume anymore.  It is almost as if investors are so saturated with equities, and with so many dips this year, that it doesn't entice a lot of buyers to come in.  That is a change of character from the past 5 years when down days were always on heavy volume, and up days on very light volume.  There was always a lot of willing buyers coming into meet the sellers on a dip.  Not so much these days.  

The VIX futures are stubbornly trading much higher than the VIX cash, even though the Feb futures only has a few trading days till expiry.  Perhaps it is Greece risk, but equities haven't gotten the memo to sell on Greek uncertainty.  Let's not pretend like this is some kind of grave danger to the market.  How many rumors do you need to figure out that the Greeks and EU will agree to kick the can down the road, another 6 months at least.

I am seeing tops forming across the two favorite risk asset classes: S&P 500 and USDJPY.  USDJPY is very close to the 124 level that marked the top in 2007.  Both should make marginal new highs in early March, which should coincide with the coming rate hike talk from the Fed.  This market is toppy enough to collapse from its own weight, it doesn't need any help from Fed rate hikes to go down.  But if the Fed is stubborn and wants to prove that their rate hike talk was not a bunch of BS even though the economy is slowing down, then they will just be hiking into the next recession.

So many bearish forces are at work while we dance around new all time highs.  Like 2000, and 2007, the economy is slowing down ahead of the top, not after.  The commodity complex can attest to this.  It is not just increased supply, demand is lackluster.  China is clearly slowing down, and Europe is moribund as usual.  The 2013 and 2014 US economy is much stronger and healthier than the current one.  Don't let the strong nonfarm payrolls fool you.  These are low paying McJobs, many of them part-time.  Are two part-time jobs better than one full-time job?  

When March arrives, I will be ready to zip up my bear suit and operate from the short side.  The bear suit has gathered a lot of dust.  I've always felt more comfortable from the short side, so it shouldn't take long getting used to shorting gap up opens and covering weak closes.


Anonymous said...

I like to take more of a first hand account in the trenches so to speak than rely on data crunched by a bureaucrat or analyst in a cubicle on wall street. US consumer seems strong. Shopping mall parking lot here in Lakewood, CA is packed on a late afternoon on a Thursday. Weekends are worse.

As for oil, the Signal Hill Oil Company owns 90% of the oil rights here in Signal Hill which is a historically oil rich piece of land going back to the Socal oil boom of the early 1900's. I've been watching the rigs to see if they are turned on and off. When oil was crashing late last year and earlier this year, the rigs were mostly turned off. They are mostly all on now.

Market has just broken to the upside its range. I won't bet that it will go to 2200, but I wouldn't be surprised if it does. That's just what happens often technically.

What do you think about bonds over here?

MM111 said...

I don't know about that MO. Maybe a correction but with all this money printing we are probably going to go a lot higher.

Anonymous said...

I am bullish short term on bonds, I think we go up from premarket on Tuesday iand rally till the end of the month.

All kinds of sign of toppy action that is different than previous years, and let's not forget valuations which are very expensive now.