Friday, March 11, 2016

Still No Sign of a Top

As I watch the S&P 500 levitate higher, I am seeing no signs of excesses in the market.  The Fast Money crew are still skeptical of the rally, and skeptical of anything that the central banks do.  The boisterous BK on Fast Money was bearish and still in denial that he has been wrong for the past several weeks.  The others weren't too bullish either.  The put/call ratio still remains elevated.  There are definitely a lot of bears still out there hanging in there, even though they are losing money here.

We need to see bulls come back in more aggressively before you start seeing signs of a top.  Today is a step in that direction, with the post ECB bazooka bull parade.  And it was done and the euro even strengthened, which is a double bonus for US equities.
Next week we'll have the Fed doing their usual stall and delay tactics for rate hikes.  What they did in December is an anomaly.  They had to raise rates even though they didn't want to because they PROMISED TO.  There are no more promises, so the Fed will be back to their usual excuses to not raise rates.  The market will love it.  The Fed always trys to act like there are string of rate hikes ahead with their sunny economic forecasts with clear blue skies.   Yet when it comes time to pull the trigger, they find the slightest excuses to delay a taper or rate hike.  See Bernanke, Sept 2013, Yellen Sept 2015.  This time, they have a legitimate excuse, because the global economy is slowing.  Even the US economy.

In the short term, the market pushes the weak hands to the brink and forces them to do what they don't want to do, which is liquidate at a loss.  That is what is happening to stubborn shorts.  Once that cycle is through, we'll get back to fundamentals of a slowing economy and lower interest rates and weaker global equities.  In the meantime, just watching and observing for signs of a top.


shzhning said...

Love your posts. I used to get killed by shorting the grinding up market. Now I can relate to what you said a few days ago about "never short a dull market". Today's another one of those days.

Market Owl said...

Yeah, I've been there too, shorting a few weeks after a V bottom, thinking this has gone up too much, and getting grinded down. It is all too familiar to me. That is why I don't do it anymore, thankfully. I learned my lesson over the years. I will short again, but only when things line up perfectly.