Historic Breakout Or Another Head Fake
Let’s take a look at some compelling bullish cases for a change.
The article presents us with the following chart…..
As a technician I have to admit, it appears the market is breaking out. At the same time, it might be too early to come to such a conclusion. The breakout hasn’t been substantial enough to be confirmed. Further, considering today’s valuation and overbought levels, we might be witnessing yet another head fake at marginally higher levels.
Great analysis and many wonderful charts. The author eventually comes to the following conclusion…..
The impact of the Fed’s extended period of zero interest rate policy was the creation of illusory gains. However, many analysts expect a market correction to an outright market collapse while the technicians and bulls out there expect the bullish activity has much farther to run and attribute this to positive economic activity.
As for me, I believe we are in deep trouble and the market is now a matter of national security…the federal funds rates will surely be pushed into negative territory and asset prices rise unbelievably. For those thinking this is a “free market”, the further gains in the equity market will be shocking. Detailed domestically HERE and globallyHERE. The absolute disconnect of asset prices from economic activity is and will continue to be unlike anything we have seen. This is no more of a “free market” than shooting a cow in a pasture is “hunting”. “Invest” accordingly, but know full well the ill gotten gains will one-day, someday, sooner than later, be entirely gone and we’ll all know what it felt like to be Bernie Madoff clients.
Alright, fair enough. I believe Chris’s analysis is dead on in terms of fundamental and macro picture, but in my view he comes to the wrong conclusion. True, the stock market at the present levels is a matter of “National Security” of sorts. The Fed has nearly admitted as much. Yet, I don’t agree that they will be able to juice it up indefinitely into the stratospheric levels.
We are still seeing proper patterns developing in the market. Plus, considering today’s bullish sentiment readings, everyone is expecting the same outcome. The outcome outlined above. And that rarely happens. More likely than not, the market will surprise everyone.
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