Stimulus S.O.S.

 Here we go again.  Yesterday, the politicians had to throw in their word on a fiscal stimulus package before year end, and now the market is floating higher on stimulus hopes.  S.O.S.  Of course that is on top of the continuous vaccine pumps that we've had for the past 3 weeks.  Don't know if the stimulus will actually get passed, but I don't think it really matters, the market is expecting a stimulus bill passed sometime early next year when Biden gets in, so its not really a big deal whether it gets passed or not. 

Looking back at 2020, it was just a giant bear trap that killed the bears.  2021 just may be the giant bull trap that kills the bulls.  There are clues in the market that tell you that this rally is a bit different than those in the past.  Normally, after a capitulation low, and a 5 week rally to an all time high, the VIX goes down way below 20, and usually below 15.  Instead, the VIX has stayed above 20, even with realized vol much lower than implied vol.  You really haven't seen this kind of VIX action since the late 1990s/2000.  

You also haven't seen the same kind of dispersion between the Nasdaq and the Russell 2000 since the late 90s when like this year, Nasdaq was the strongest and the Russell 2000 was the weakest.  Only in the very late stages of the bubble in early 2000 did the Russell 2000 finally start to keep up with the Nasdaq and even outperform.  

That is what is happening now.  They say that strong breadth is positively correlated with future stock returns.  Yes, if coming off a bear market and or deep correction when valuations are not expensive.  Right now, we are at extremes of overvaluation in stock market history, so strong breadth is more of a sign of a euphoric topping phase to these eyes.  Time will tell, but the excessive money printing doesn't always go to the stock market, but can go to the real estate market, or even go to the bond market.  

Most of the excess money supply in Europe has gone to the real estate and bond markets, as the stock market has gone nowhere for the last 13 years there, while real estate prices have risen strongly. 

It has been 5 weeks since the October 30 bottom in SPX, which is about your standard 4-5 week rally off a capitulation low, before you start getting into more choppy trading and more range bound prices.  Lot of "good news" lately, and optimism seems a bit overdone here, so I took a small SPX short yesterday morning to try to pick the top of the range.  Not a great setup, but ok for a small position, just to keep me interested in following the indices and ready when better things show up.  Still mostly focused on individual stocks, where the action has cooled off a bit, but still some opportunities there.