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With the stock market surging higher – and key technical indicators turning bullish – it’s hard not to believe that the bear market has been canceled. Why would stocks be rallying so hard otherwise?

This is a good time to step back and ask: What is the stock market? Is the stock market an objective barometer of the economy? Or is it a subjective representation of a crowd trying to ascertain the future? While most people tend to think it’s the former, in fact, it is the latter. The stock market is a crowd of people trying to figure out what’s happening. It is a subjective phenomenon, not an objective one. Can 10,000 Frenchmen be wrong?

Yes, they can. If in fact the underlying conditions do not support the premise that the bear market has been canceled, eventually the crowd will get the message and the market will roll over again. It may not happen today or tomorrow but it will happen eventually if this rally is not supported by economic reality. It’s hard to keep your head in the heat of the moment but 10,000 Frenchmen can be wrong – and I’m betting they are.

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