Who likes this market? Raise your hand. Hmmm…looking around, not seeing many hands raised. Ok, that makes sense.
Since the beginning of the year markets have continued their upward climb started since the frightening dip in early October, and all I hear and read are complaints: why won’t this market pull back? why can’t I get back in? How is this market going higher without me?
One of the most hated rallies ever – as always. Nearly five months of ‘almost’ uninterrupted movement. A very impressive move by any measure, but not many have enjoyed it.
Volume has been decent but not vibrant, there are many waiting on the sidelines for that ‘perfect’ entry on a pullback. As we know, markets rarely accommodate those players.
The roadmap has been pretty clear, and while there are those who try to ‘will the market’ to perform a certain way, that is all just lip service. Bears? What can I say – shorting the rallies has created little in terms of profit opportunities. There have been a few but you needed to be nimble and quick.
Spring is a time for blossoming – perhaps the markets will come in and re-establish itself higher through the summer. Be alert but not influenced by the noisy news. Experts, pundits and analysts will do everything possible to twist your head around and back.
Sell here, buy there. NONSENSE. Listen to the markets – they will tell you more about the REAL action and activity than any talking head.
I suppose we could talk about a pullback or correction. Heck, 27% in the SPX 500 over five months is something to be marvel at, but let’s look at this a bit closer.
On the surface, new all time highs by IBM, Apple, Qualcomm and other oil, industrials, retail and consumer goods within a whisker of new highs is not terribly bearish to me. Microsoft is at multi-year highs, and the mantra used to be ‘as Mr Softy goes, so goes the Nasdaq’. Speaking of Nasdaq – at 11 year highs just last week.
Earnings have nearly finished up for the 4th quarter of 2011, by and large they reflect the results we had been looking for all along. In addition, the optimism is fairly widespread for a prosperous 2012.
Would that be a reason to sell? As a contrarian investor/trader you might consider new highs to be the ultimate shorting opportunity. I get that, but trends continue longer and farther than most expect (see charts below), and that bearish opportunity may just be a bit further out than you might want.
This a good time to take a look at a couple of charts. These are the SPX on two different time frames. One goes back to 2009 and the other just the past six months (both are daily charts).
You can see the patterns are clearly showing some different ‘potentials’. The six month chart says the rally can continue until the technicals breakdown, while the three year chart says previous bullish runs like this expire right about now.
If we follow the pattern of 2009 (which was strong from March without much in the way exogenous events to derail it) then many more will be surprised.