Stock market seems stalled near the all-time highs. PE ratios are through the roof. Despite the Fed-fueled market, we have, in fact, a very deplorable economy, with high unemployment.
Beginning to feel like it is a bear market. You get sharp, fear-ridden drops, and very sharp, bear-market rallies that end up fading. Feels like that is about to happen. Look for these 1.5%+ rallies that end up fading after sharp drops. If that starts to occur, would not be surprised to then see a big 5% down day soon. That would really unnerve the market. That would mean the bear market has begun with a vengeance.
Everyone is thinking the Fed will save us. What if that is wrong? One thing you don’t want to do is buy the dip in a true bear market — what everyone has been doing now for 10 years.
The new mantra could be sell the rally — as in get out — and then go short. But watch for these sharp drops, followed by explosive rallies. Yesterday was kind of like that. The S&P actually went down sharply to 3805 and then rallied back to a decent gain before ending the day fading into a small positive uptick.
When the bear does start, all the buy-the-dip traders are going to be fooled.
Henry's Views 