Stocks are pulling back a bit since their March 1 peaks, but nothing dramatic so far. The S&P 500 has now gone 99 trading days without a 1% down day, so if stocks don’t drop today this move will join the 100 day club. That hasn’t happened since 1995.
Let’s have a look at the Nasdaq chart:
All my indicators have turned down, so March 1 may have been a major peak. But we have to watch carefully what happens next here. If the current pullback stays short and shallow or sideways then it will probably be followed by another 5% surge higher. Such a shallow pullback could see Nasdaq test 5800, but not much lower than that.
This market has been doing all the right things, as described in my December post, and that means a final strong advance is quickly becoming the base scenario. One of the main conditions is an S&P push to 2500-600 before summer and that doesn’t look so crazy anymore.
If we get that kind of blow-off peak scenario then we should start seeing the typical symptoms that come with it. Look for reports that a lot of new investors are opening brokerage accounts and buying stocks for the first time. And a much more buoyant mood on popular investor hangouts like Stocktwits. At the same time look for known bearish sites to become less popular. Once retail investors cave in and put more of their savings into stocks their appetite for bad news, bubble warnings and bearish commentary goes down. I like to use Google Trends to keep an eye on it. For years I have been expecting that Stocktwits would become more popular than Zerohedge by the time this market peaks. And that seems to be happening now:
(source: https://trends.google.com/trends/explore?date=all&q=stocktwits,zerohedge )
The surge for Stocktwits shows that retail investors are quickly warming up to this market. Meanwhile Zerohedge seems to have lost about 20% of its audience in recent months. If those trends continue and Stocktwits clearly overtakes Zerohedge then it will be a very significant indication. And then the difficult job will be to determine when and where this love affair with stocks will end. Such a final surge typically lasts between 8 and 18 months.
Great post LT.
re: Such a final surge typically lasts between 8 and 18 months.
Indeed, the last phase can be powerfully bullish… almost exponential in some things.. .before a fierce reversal. Current price action is pretty strong, but it sure ain’t hyper-bullish. For that.. we’ll surely need something close to sp’3K.. if not 3500/4000.
Eyes on financials and energy… those are central to further upside. Need higher rates and WTIC oil >$60.
re: Stocktwits/ZH. Indeed, even the doomer crowd is tired of the spin ZH puts on every story. Its now almost click-bait. More are interested in actual investment chatter.
Good wishes LT !
Thanks for chiming in. An exponential stage after a multi-year advance always becomes very difficult to read. It can be fairly short, but it can also go on for many months. How crazy things can become is anybody’s guess, as we learned in the late 1990s.
The S&P 500 and Dow Industrials have now entered the zone where there are no clear cut overhead resistance levels anymore, just blue sky. Major round number may work, time will tell..
Oil seems to be turning down right now, but stocks don’t care. With interest rates widely expected to go up more, holding bonds is like signing up for a guaranteed loss. So, it’s not a big surprise that most investors are holding on to their stocks, which are still going up.
Once rates are high enough and no longer expected to rise much further, that’s when some investors will start looking at bonds as a good alternative for pricey stocks. I think that will start happening when US 10Y rates are >3%
This is Robin Handler’s (The Stock Market and the Lunar Cycle – 1986). He has interesting stuff nightly on the Moon, Planets and Space Weather.
Run the site http://oss.cc
Thanks. I will have a look.
Zero hedge is full of racist people writing their sermons in the comments section. Scary prospect for the democratic union.
ZH has rapidly degraded in recent years. Partly, its (understandably) due to the fact that almost their entire audience is financially blind to what is now going on.
Every story is spun as ‘omg.. the end is imminent’… and they are clearly catering to what their audience want to hear. Few want a balanced outlook. They only want to hear what they believe.
It is in the nature of newspapers, websites and other media outlets to provide the kind of news that their particular niche audience wants to read. Not doing that means going out of business or seeing a competing site pick up the audience that is no longer served.
This scares some people, but not letting it happen would be even less democratic. As my old neighbor used to say, if some people are not being heard then you can only expect them to become louder.
The waxing and waning popularity of sites like ZH is an indication of changing zeitgeist and as such it is useful to get a good read on the mood in the stock market too.