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  Is This the ?Mother Of All Blow-Offs?? Probably  
  Lorimer Wilson on 2018-01-24 15:17:48.0
 
 

Chasing the price-momentum higher and waiting for a bigger idiot to buy shares from you works well until the music stops. Then everyone gets hurt.

The original article by Dave Kranzler has been edited here for length (…) and clarity ([ ]) by munKNEE.com to provide a fast & easy read.

The Dow moved up an average of 120 points per day in the nine trading days since the end of 2017. This includes one day in which the Dow dared to close 12 points lower. That one day felt like a bear market. Over this entire period the Dow has appreciated 4.4%. Since the election, including the 1,000 point plunge in the Dow futures that occurred when it was apparent Trump would win, the Dow has soared nearly 50%.

What's driving this?

Since late August, the public has literally thrown money blindly into passively managed ETFs which automatically distribute the cash inflow by market cap weighting into the stocks in the index that underlies the ETF. This means that most of the gains are concentrated in the stocks in the Dow/SPX with the largest market caps, which then drives the Dow/SPX higher. For instance, last Friday, the Dow was up 0.89% but AMZN was up 2.2%, Netflix was up 1.8%, GOOG was up 1.5% etc.

There's no telling how much longer this can persist without some type of accident.

Judging by the data on cash in customer brokerage accounts at the big online brokers, I would have to believe that this last push from the retail investor is nearing its completion. Data from the fund industry has shown a massive migration of investor cash moving out of actively managed mutual funds and into passive index funds. This would include money managed on behalf of individuals by registered investment advisors.

Most investor sentiment indicators are showing extreme levels of bullishness ? historically unprecedented levels.

The short interest on the NYSE has melted down nearly to zero. The Acting Man blog has written an excellent post which details the sentiment indicators flashing bright red warning lights ? I recommend a perusal: Mother Of All Blow-Offs

For now, the raging bulls chasing momentum conveniently:

  • ignore the deterioration in ?new orders? and ?employment? numbers in deference to the statistically manipulated headline reports that purport to show economic growth.
  • Most of the bullish reports are over weighted with ?sentiment? and ?hope? metrics that offset declining real economy statistics.
    • Credit card and auto loan delinquencies ? both subprime and ?prime? ? continue to increase a double-digit rates…
    • As for the ?prime? credit rating designation of 2017, it's not your mother's ?prime? credit rating.

At this point I don't want to speculate on how much longer that Dow/SPX/Nasdaq can go straight up.

Historically this is the type of market behavior which has marked the blow-off top of speculative manias and has preceded serious market accidents.

Conclusion

Is this the ?Mother Of All Blow-Offs?? Probably.

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The post Is This the ?Mother Of All Blow-Offs?? Probably appeared first on munKNEE dot.com.

 
 
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