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Holy cow! We thought the market had a chance to go higher, but this latest shift in market sentiment is surprising even to us (and we don’t surprise easily).
The indexes blew past our targets earlier this week, and don’t show any signs of stopping just yet. Stocks are way stretched, with just about every metric moving into nosebleed territory.
Suddenly everyone is a buyer of stocks, especially tech. Many investors are chasing anything that just whispers the words “artificial intelligence”, or “AI,” as the cool kids call it. Even the staunchest bears –Morgan Stanley, JP Morgan, Bank of America, and Canter-Fitzgerald, who have been relentlessly beating the gong for a market crash at any moment – are running for cover under their trading desks.
We’ve never disagreed with the big players’ bearish predictions. Their crack teams of researchers and analysts are usually very good at knowing the eventual direction of the stock market. And they are even better at explaining why it will move in that direction, complete with beautiful charts and graphs so pleasing to the eye.
It’s the when it will happen part that the major brokerage firms struggle with, and this time is no exception.
We think it’s because they don’t put boots on the ground. If they got out of their ivory towers and spent any time with us commoners, they would get the pulse of the folks actually buying and selling stocks: the ever-elusive market sentiment that leads rallies and sell-offs. And then they would realize that all their facts and figures and charts and graphs and wonderful presentations don’t actually move the market.
You see folks, sentiment reflects emotions, feelings, and attitudes. And right now, investors are feeling really good – giddy in fact – which is causing them to chase stocks to the stratosphere despite all the negative reports being spit out by the guys at 4th and Wall.
Again, we agree with just about everything the big boys are predicting. We just think they continue to be early.
So when will this latest bull run come to an end? When sentiment reaches euphoric levels (it’s getting very close), and everyone wants in (fast approaching). We look at measures like Relative Strength, which is almost 80. That’s historically where big runs exhaust and where we start to throw the caution flag out.
But who knows? We didn’t think we would go this high.
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