The most hated rally of all time. That is what I’ve been hearing of late, and no wonder so many are frustrated by missing out on the upside when the ‘wall of worry’ is up. When doubt creeps in so does courage or boldness, as the market moves without the majority of the crowd. Yet, it seems every bull rally is hated due to this same reason. When the wall of worry is showing, ‘high price’ warnings come out almost daily then markets will defy the consensus.
Of course, it cuts both ways. When the crowd is ‘all in’ as it appeared in 1999/00 the markets were ripe to be hammered. Yet, this current bull rally that started post-Brexit has technicians quite curious and fundamentalists dumbfounded. While the worry of high prices confounds the experts and the endless need to predict the ‘end’ by some naysayers, price action continues to impress after the surge in July to new all time highs. Is the market overvalued? Why does price keep getting stronger when ‘it is not supposed to’? Ahhh..the question confounds everyone.
We must always respect price action no matter what other indicators are telling us, even if volume levels are weak. Some indicators recently such as breadth, volume, put/call ratio, money flow and McClellan Oscillator were flashing warning signs. Indeed, the indices did correct a bit as news from Q2 earnings started to slow down and some events were upcoming such as the Jackson Hole Conference, where Chair Yellen spoke and the August jobs report.
No doubt it was prudent to wait but price barely budged at all. We have heard from plenty of ‘dragon slayers’ that this market cannot continue to rise – folks like Bill Gross, George Soros, Stan Druckenmiller and other bloviators. The fact is, these opinions are not based on fact, rather just a notion or even something more devious such as ‘talking their book’. All that is fine, as the price action with a negative notion will continue to produce higher prices – that is the historical perspective.