Friday, March 4, 2016

Things Never Change

It is 2015 all over again.  How soon the bears forget that when a V bottom has been made, they need to get the hell out of the way, and quickly.  The week after the V bottom on February 11, we were up over 100 SPX points from the low, but so many investors were in denial, even though the price action screamed strength.

The crowd got too bearish in February.  It couldn't last unless the center didn't hold.  And the center held.  I don't buy that the economy is suddenly looking fine after a few above consensus economic data points.  The overall trend is of a slowing economy.  But what matters is that the Fed is frozen, and the market doesn't have to fear Fed rate hikes and an even stronger dollar.  In fact, oddly enough, you are getting dollar weakness vs euro even though you had a big beat in the jobs number.

I know we are still down 2% for the year, but it seems like it's been much easier to make money going long than going short.  The rallies just seem so much more predictable than the selloffs.  It doesn't mean that we don't selloff, because obviously we have often.  But they seem to come without warning, while the rallies always seem to be just around the corner when you get the VIX towards high 20s/low 30s.

Within a week or two, after the ECB bazooka and FOMC dove talk are out of the way, there is nothing there to hold this market up with the stock buybacks going to their blackout period starting in late March.  There is still room aboard for late bulls and FOMO investors to jump in and buy near the top, but I am betting that not many suckers will bite this time.  There may have to be some good news, which I expect out of the ECB and the Fed in order to get the last bulls on board.

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