Thursday, July 14, 2016

Unreal Buying Momentum

I haven't seen this kind of equity buying momentum at a 52 week high since 2014.  It is a real change of character from the 2015 Q1 to 2016 Q2 market.  Due to the long period of basing between 1800 and 2100, and the worry built up over that time period, this breakout should last a while.

This move has definitely surprised me, and probably a lot of others as well, not because we made new all time highs, but because we are gapping up so large day after day despite having already rallied very strongly.  This is like a throwback to the 2009-2013 relentless rallies that defied belief.

Despite the high valuations, lack of earnings growth, and sluggish global economic growth, we are chugging higher based mainly on the central bank theme of easy money and low bond yields.  With a politicized Fed that wants to keep the stock market up ahead of the presidential elections in November (to favor Hilary), you will not be seeing anyone take away the punch bowl till winter.  The market is catching on to this as there has been a notable recognition among the fixed income community that the Fed is frozen here as it awaits any Brexit fallout (a total joke of an excuse, by the way) and uses China worries as an ongoing excuse to not hike.

The only people bearish are the permabears like Brian Kelly of CNBC Fast Money who has been telling everyone to go to cash since S&P 1812 and brags about being long gold and TLT during their rallies.  You are in the final stage of bull market here, but it felt like that in 2015 as well.  And look where we're at now a year later.  It is a tough market for those trading the 2015/2016 first half playbook.  The game has changed, and it is time to adjust.  Not by chasing stocks higher, but by being more careful with S&P shorts and Treasury longs.  I am not interested in playing the bull side at these levels, except for very quick trades.

We are still in the midst of an extremely strong buying thrust, so only the best short trades need to be taken here.

No comments: