Typical Bashing

Indeed, the market took something way too seriously today. Doesn't it know that we only want to see prices rise? Alas, this will never be the case. Its actually an important part of a bull market to have prices decline. And they are typically sharp ones at that. I recall a study of the worst declines of the last 50+ years and at least half of them occurred during bull markets. It serves to keep the fear factor up and money on the sidelines. This keeps buying power in reserve, ready for an opportunity. Today's decline in S&P 500 terms could easily find a low in the 1490 - 1500 range but more likely lasts only a day or two and doesn't broach 1500. During a bull market, the sharp selloffs rarely get far as buyers who understand the move take advantage of the selloff. So we should see limited weakness from here before another run at the highs.

While the number of new highs have been good the last few weeks, breadth has been a little suspect. This is troubling in terms of the NYSE Composite which did set a new high while breadth did not. We can give this a little while to correct but correct it must. Yields are helping here falling back to 5% but I am a believer that they are going to go higher, rather than lower. The global economy is just too strong. Oil rose again which should hurt but lately doesn't seem to matter.

A most interesting point regarding the market was a piece i recently read on earnings. Naturally, earnings are one of the, if not THE, main driver of stock performance. Typically, earnings pre-announcements are negative and they are released in the month leading up to quarter end (like June). However, the recent spate were more than 3:1 negative:positive which is considered bearish. Yet, through this period of negative forecasts the market has held itself in consolidation at or near the recent highs. Either the market is stupid or the negative preannouncements will not matter. I go with the latter.

Either way, stay tuned.