Calling this a “bullish” run might be a bit of an understatement. There has been an unprecedented bid under the market since August 2010. The Bernanke Put is well entrenched in everyone’s minds. This morning’s spike in jobless claims was not enough to cause risk appetite to temper as it likely just reminds investors that rising claims are what led to QE2 to begin with. Indeed, this is a Federal Reserve that will not allow equity prices to falter to any substantial degree. Nominal wealth creation has become the rally cry of a group of economic thinkers who truly have no idea how to create sustainable economic growth.
The stats behind this bull market are even more remarkable than the rally itself appears. As I noted in December the market literally could not decline. But the data since then shows an even more untouchable market (via ZeroHedge):
“As a point of reference the S&P has been above the 10 day average for 30 days straight, and above the 50 day average for 92 days straight. What is remarkable are some statistical findings as pertain to the average’s movement with respect to the SMAs. Sentiment Trader points out that while as part of the recent surge in the S&P, the market has gone for “92 days without closing below its 50-day average, which has been matched only 17 other times since 1928.” Where it gets scary, is that as pointed out, during this time the market has not closed below the 10 DMA once during the past 30 days. And as Sentiment Trader notes, “this has never happened before, in 82 years of history.”
Not much else needs to be said. The teflon market is here.
Update: Some additional thoughts from Jeff Saut:
Herb Stein once remarked, “If something can’t go on forever, it won’t!” And, the current “buying stampede” is now 90 sessions long, making it the longest one ever recorded in my notes of more than 40 years. Combine that with many other “finger to wallet” indicators suggesting caution and I am currently just sitting. Indeed, sometimes me sits and thinks and sometimes me just sits. As the astute Lowry’s organization opines, “Our last short term sell-signal for aggressive traders was triggered on December 30th, when the 14-day Stochastic indicator dropped from overbought levels and crossed below its moving average. A conventional short term sell-signal, for culling selective stocks [from portfolios], was registered as of today’s market close (last Friday), when our Short Term Index dropped a total of more than 6 points from its recent high of 104.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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