Market Briefing For Monday, May 10

Tight correlations - with preceding distributional highs, aren't comparable to the extent so many historic tops exhibited technically or fundamentally; and of course not to the frothiest bubbles, regardless of any claiming that condition. I am not saying many valuations are stretched; of course they are. I am saying that the backdrop of this liquidity-driven more both defies those fighting it, and has been rotatationally correcting and bouncing, rather than any sort of broad topping formation that actually preceded months ago near an internal high.

I should note there is no prospect of an ultimate high now; barring exogenous influence; but there already is an internal 'calm' prevailing; which isn't labeled as such, but to me is a form of an 'indecision pattern' by most managers (they are nervous and trying to hedge; but also unwillling to surrender positions).

At the same time there has been algorithmic trading (leveraged) dominating this market; and it is sort of fractured (I call it bifurcated); that supports somewhat, what the biggest money managers already own, rather than value based upon logical statistical data or fundamental assessments.

The closest this comes to logic relates not just to growth or momentum; but to the Fed-backed liquidity injections, which perpetuates TINA (for anyone new it means 'there is not alternative' to equities) in this ongoing environment. Also it isn't really a broadly extended market; those very stocks (even as they've had a dip more recently) are 'buttressed' by Oils and Industrials to sustain the S&P image of being right at the highs. Some are more influential in the Dow Jones Industrial Average; hence helping it be essentially at record highs right now.

Executive summary:

  • Structurally the S&P high-level pattern persists as does May risk as well;
  • This time may not be different; but it is special; with no sign of abating on the part of fiscal and monetary policies that -while experimental to be sure we emphasize- have not ended; not pillars presuming underpinning really the core primary trend, while not denying our April-May corrective actions;
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