It has to be frustrating to be a bear in this market. Just when it seems that the market has reached its breaking point and will plunge to new lows, it instead turns tail and heads higher. In fact, ever since the correlation bubble popped in January 2012, there have been a slew of reasons for investors and traders to sell, but the bull train keeps roaring full-steam ahead.
Despite the market’s strong performance, there has been talk about a bubble in stocks a la 2000, but we don’t have the same absurd valuations today there were running rampant 15 years ago. This time around, the market is expensive in some sectors but rather cheap in others.
That brings us back to the bears’ “top calling.” Of course, it is just guessing – there aren’t many facts to support such a dire forecast. Plus, as history has told us time and again, those who call tops in the market rarely ever get it right, unless they are open-ended (we still have some guy out there claiming the SPX 500 will go down to 300 – someday). However, if you got caught up in the top calling, it has been painfully expensive.
It’s time for a little global stock market analysis, because things are getting out of hand.
Who really is an expert at predicting a top? The market is the answer, not a pundit, not an “expert,” not an analyst, not a self-professed bear – I don’t care if they got it right once and are now considered a guru. The market will always tell you the truth – every time. Don’t listen to people; listen to the market, because it will tell you what it will do.
Sure, you might want immediate answers when the market tosses us for a loop, like last Friday’s jobs data did. It was a strong report, but investors panicked – they assumed the Fed will raise rates. The top-calling-guessers were out in full force again, though they completely failed to take into account price action, turnover, sentiment, the VIX, put/call ratios, market oscillators, or other market-derived tools that give us a clear view of market direction. Nope, these things were never mentioned, and those are the things we pay attention to, because they tell us what the market is doing.
The top-calling-guessers are very busy building that wall of worry, which, funny enough, tends to carry stock prices higher. (It is when we see everyone piling in at one time that I will get worried.) Trying to time tops and bottoms is a loser’s game. I prefer to let the market tell me where and when the top will come, and, so far, it has not given us a signal.
My advice: keep on trading and investing as the market dictates.
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