GZ, i agree that there are situations when a show of vigilance by the Fed is interpreted bullishly by the market. however,this market is still sporting record multiples and it is hard to see how they can possibly be maintained in a rising rate environment. while it is possible that the bubble could expand further, i do not believe that intermediate term strength can be expected. whenever bullishness as evidenced by investment newsletter writers and options traders reaches fresh heights such as recently, the market at best manages to trade sideways for a while. more often it sells off sharply, which then leads to an adjustment in the sentiment indicators. sometimes, as was the case during the jan.-march consolidation, the adjustment takes place during sideways movement. what worries me specifically about the high bullish consensus is that it coincides with a market decline and an eight-month bear market in bonds. to argue for an immediate continuation of the bull market i would have to see a lot more caution on display. in the very short term, the market has successfully defended certain support levels, which is to be expected. but there is no evidence of a lasting intermediate term bottom imo. when the current counter-trend rally is over, the selling will likely resume with fresh vigor. many important stocks have broken support levels, and the formerly hottest sectors of the market are clearly in trouble, which is definitely no cause for optimism.
i will change my opinion only when i see clear reason to do so; one has to be nimble and not get wedded to one's opinion. it takes a lot to stop a mania and i am by no means certain that this one is over, so the run to new highs that you are predicting may very well materialize at some point.
regards,
hb |
