Uh Oh, Interest Rates Have Nowhere To Go But Up.

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Excerpt from this week's newsletter:

Against a backdrop of global tension and fears of rising interest rates due to the Federal Reserve’s tapering, the S&P 500 made another all-time high last week. That’s 28 record highs this year. The index took only ten sessions to climb out of its recent 4.3% correction.

As the “Chart o’ the Day” on Friday, Joshua M. Brown posted Mike Harris’ chart of the S&P 500 over the past two years (below). The index has barely taken a break from moving higher. This behavior, Harris contends, is different from other bullish periods in which stocks would pause and consolidate in between moves. (Chart o’ the Day: Have Flat Markets Been Outlawed?)

Josh Brown writes,

[Mike Harris is] showing you that every pause in the US stock market over the last few years has been a quick drop and recovery, with almost no periods of consolidation (a flattening trend between uptrends).

He then goes on to show how different this period is from others – where stocks were able to flatline before resuming uptrends. He posits the question of whether this is being caused by randomness or the presence

of too many alpha-chasing managers or something else entirely.

This is your must-read post today: The 1990s, the 2000s and the 2010s (Price Action Lab)

(Chart o’ the Day: Have Flat Markets Been Outlawed?)

Whatever the reason for the unique pattern, proving that US stocks are overpriced has been non-productive. So has laboring over historic charts to identify clues that the bull market is over. 

Trends change. But if stocks climb a wall of worry, we have plenty of walls. The “real” US economy is not as robust as government numbers suggest. Unemployment is higher than reported due to people dropping out of the labor force. Only high-end homes are selling like hotcakes. Money flowing into the stock market is borrowed (debt!) for company buy-backs, not organic growth--while employees get laid off. China isn’t growing as fast as we thought. Abenomics is not working as well as Japan thought. Conflict in Ukraine is stressing the European economy. ISIS terrorists are overtaking Iraq. The worst Ebola outbreak yet spreads through Africa. And meanwhile, the Fed is still tapering and interest rates have nowhere to go but up!