Grinding Higher Like 2017

The VIX is back down to the 16s.  The SPX is almost back to all time highs.  And bond yields are also grinding lower over the past several weeks.   It looks like all the dip buyers, me included, will be left behind as the bus leaves the station.  The market in 2021 is reminding me more and more of 2017, when after a volatile first half of 2016, you got a blastoff to new highs after a much feared election.  

If you remember 2017, it was the year when the Fed was hiking rates, yet the 10 year yield was going down for most of the year.  Also, it was the year when you had the much anticipated Trump tax cuts which were being negotiated.  Similar to the fiscal stimulus this year, with the $4 trillion infrastructure package waiting to get passed.  

The amazing thing about 2017 was that the SPX stayed above the 50 day moving average almost all year long, and never touched the 100 day moving average the whole year.  

So far this year, the SPX is even stronger than it was in 2017, with even less time spent under the 50 day moving average, if you extrapolate over the rest of the year.  And it hasn't even gotten close to the 100 day moving average.  

There is a huge amount of underlying demand for stocks.  I have underestimated the buying power and desire for investors to buy stocks.  It feels like this market will keep grinding higher with only very brief and shallow pullbacks and enter a parabolic phase either later in the year or in early 2022.  With the Fed staying with their over the top dovish stance, expect the bubble to keep getting bigger and bigger until they actually do something other than talking about thinking about talking about taper at a future meeting. 

Remember, the fastest gains happen at the end of the bubble, so that's probably what's going to happen before this bull market ends.