Ever try to drown a beach ball? Yeah, you know its something that can't be done.. so why even bother making an attempt.. right?
That's where we are with the stock market. I've written and talked about this for years.
Over 7 years ago.. with the stock market almost 4 full years into one of the strongest bull markets in history.. with prices to rise another 5+ years... market participants were baffled at the relentless upside for the stock market.
I wrote at the time..
“Alex I’ll Take “New All Time High on The Dow Jones Industrial Average for $16 Trillion Please”
Yes... the proverbial beach ball drowning.
Stocks would fall for a bit. usually the first 40-60 minutes of the trading day, as participants try to 'drown the beach ball' and then the beach ball pops out of the water and goes higher.
That is the stock market in a nutshell over the years from the March 2009 lows and that is what it is trading like now. BTFD, buy the dip... I've compared it years ago to Pavlovs dog.. where the buy the dip mentality is fed over an over until all it takes is a bell ringing for the dogs to attack.
Price action remains buoyant. Dips continue to get bought. And the stock market continues to trend higher.
This comes in the face of some of the more negative headlines we've seen in some while.
Cities in a America are literally being burnt to the ground. Stores are being robbed and looted. Destruction is on a grand scale.
We can add China Cold War, Pandemic, and Cities burning down to the list of excuses to sell so far in 2020....
The quick initial reaction when stock futures opened Sunday night to America getting burned down and looted was a quick 1% drop in S&P500 futures.... another beach ball drowning attempt. What happened next? The beachball popped out of the water. Futures recovered their losses and moved positive. Stocks rallied the next day.
We saw a similar event last night as stock futures fell with another beach ball drowning attempt... guess what happened next? Yes.. futures went from down .75% to up .75%.
There will be a time to get bearish on this stock market. Unlike the Federal Reserves unlimited assistance program... I don't think the stock market will go unlimited up one morning. We will top... and we are closer than ever to seeing all these untested and extraordinary policies of the Central Banks finally come to a head.
Clearly we aren't there yet. Price action continues to show the stock market is going to rally as the country burns.
How fitting is this image today in reference to the stock market?
The stock market doesn't feel. Frankly it doesn't care. What the stock market likely sees from all this is more money. More spending. More work. More productivity. More buying. More spending. How many cities are going to have to be rebuilt in some way or another. Store fronts. Equipment. All that inventory that was stolen.. will need to get replaced. Think about it for a second.
These damaging riots may have an almost stimulative affect! The damage, destruction, and chaos is actually bullish for the stock market. And the emotional part of the stock market took futures down 1% Sunday night, the emotionless part of the stock market looked ahead and saw a rebuild. Materials need to be manufactured, shipped, and installed. Inventory produced and restocked.
The destructive riots are just another casein point how smart this market is and how much it doesn't care what anyone thinks or feels.
And the price action, with that drown beach ball feel, continues to chug higher in the face of some of the most negative headlines we have ever seen.
Record people out of work. Terrible economic numbers. U.S. - China relations reaching a Cold War level.
The amount of excuses to sell continues to grow for this market. And listen... even as this Virus was taking root... the market was still moving to record highs. It took a complete shutdown of the global economy for stocks to fall. We aren't even close to fully opening yet and the Nasdaq is a few % away from a new all time record high!
The market continues to climb the proverbial wall of worry. I said the next recession would see stock prices head higher... and boy was I ever right.
I also joke the world peace would see stock prices finally get that 60% crash those uber bulls have been calling for since 2010.
You could argue that stock prices would be lower today if we did'nt have the virus. Perhaps we would be in the midst of that long awaited real recession so many have been calling for, not a virus induced one that brought with it the most massive monetary and fiscal response the world as ever seen.
The difference between the financial crisis and the 2020 Pandemic is we went from billions to trillions. The response was quick and enormous. All those trillions of $$ have to go somewhere right and of course when the FED is busy buying risky JUNK bonds... what does that say about RISK? IS there any?
Until risks come back into this market.. be it interest rates rising, a second wave of this Virus forcing another shutdown.... or the excessive corporate debt finally reaching a tipping point... this beach ball market will continue to pop higher, even as the World burns.