Status Quo; Bulls In Complete Control

A chart was shown today between gap earnings and the movement of the S&P 500 500. The last time the gap was this disconnected was in 2007, the year before the big market crash. Will history repeat itself? Hard to say back in 2007/2009 we didn't have this type of fed protection against any sustainable market downside action. The fed is making sure things stay positive for the markets, so as to keep the economy moving upward, but it is interesting to note how badly the disconnect has gotten. 2007 disconnect is the answer so let's hope that it doesn't repeat itself for 2017. When you see this type of disconnect, it's also a warning about the human emotion of froth and mania. The bulls are starting to ramp up in a very big way, and we're seeing that in the bull/bears spread, which is now back over 30% (31.1%) for the first time in a very, very long time.

We're seeing the numbers accelerate as time marches on. The bears who were sure things would collapse are now moving in to the bullish camp as are those who were agnostic. They figure why miss out on this market if all it wants to do is move north. Slowly, but very gradually, we're seeing the mentality of things can never go lower. That is true for the short term, no doubt, but it's not great to see the process move towards that fearless level that often calls tops not too far down the road. There's still room for more froth so don't fret bulls, but it is a warning for the future. The bears are giving up on a daily basis, and that's not what you want if you love bull markets forever. We need the bears to hang tough. They're not so we'll likely be adding to that bull/bear spread by the end of this week. If the market hangs tough, we'll likely see readings in the mid 30's by week’s end. We get those new readings next Wednesday for action that closes this Friday. The red flag is up. The get-out-of-the-water flag is not. We're working our way up there step by step.

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