My buddy Chris D. likes to point out that a characteristic of a “Bull Quiet” regime is when the best sell setups fail time after time. That’s what we’re seeing now.  The market is frustrating the bears by buying every dip grinding the market higher in its micro-bull channel with the 3,000 level and 200-day moving average acting as attractors.

Bearish sentiment is providing plenty of fuel for the move. The AAII Bull-Bear spread rarely gets as low as it is now. It’s tough for markets to top when sentiment is this dour.

My base case continues to be that we’re in the early stages of an extended sideways trading range/bear market. The left tail bear case has become less probable due to the extreme willingness of policymakers to flood the market with money. We also have to remain open to the possibilities of a renewed bull market however unlikely — this is not the time for having strong convictions.

While the current rally has been strong, so was the selloff that preceded it. And we’re still well within the norms of past bear market rallies.

Credit has not been confirming the move in stocks. But… while credit leads equities, the lead time can persist for quite a while before a convergence. So while this is something we need to keep an eye on it’s not an immediate sell signal.

@bennpeifert shared this extraordinary chart of DARTs for the largest retail brokerages (DARTs stands for Daily Average Revenue Trades). Apparently, retail investors have been stepping into the breach to buy the market en masse, at record-breaking rates. Maybe that’s where everyone is putting their $1,200 stimulus checks?

That’s usually not the kind of behavior you see near long-term bottoms…

Anywho, if you’re of a longer-term bent and don’t feel like jumping in and out of stocks then you may want to check out bonds and precious metals which continue to catch a strong bid.

Silver is breaking out of a month-long wedge and positioning is favorable to a move higher.

The gold vs. silver ratio recently hit its highest level in history. Perhaps it’s time for the less barbarous relic to play catch up?

There’s also some interesting action going on in some dollar pairs, many of which have been coiling tightly over the last few months.

Check out this chart of the Mexican peso (MXNUSD). I love the fundamentals of this trade long-term. Whether or not this is the start of that LT trade is anybody’s guess but it does look like it’s going to at least see a short-term pop. Relative equity momentum also recently moved in the peso’s favor, which is what you want to see if you’re buying here, which I am.

EURUSD is showing similar action… The chart looks to me like it wants to break higher.

That’s all I’ve got for now. Let’s see how the week ends. Oh, and lastly, if this market has you scratching your head, give these wise words from Adam Robinson a read.

When someone says, “It makes no sense that…” really what they’re saying is this: “I have a dozen logical reasons why gold should be going higher but it keeps going lower, therefore that makes no sense.” But really, what makes no sense is their model of the world, right? So I know when that happens, that there’s some other very powerful reason why gold keeps going lower that trumps all the “logical reasons.”

…Things that don’t make sense are an Algorithm for finding opportunities. Where do we find good ideas? Look where no one looks. When thing’s don’t make sense, get into the trade.

Things that make sense are often already discounted in the price. The things that make you go hmmm… aren’t, which is why the “no sense” algorithm is quite powerful. Markets are funny like that.