Markets continue to sleep walk through this week. It was last August when the cracks were forming in the market. We had a massive collapse at the end of the month. This time around volatility continues to leak lower. The intra-day action chops around in a narrow range. And over all price action is non-descript.
I will say that momentum looks to be waning. Aside from April of this year, each of these sell signals resulted in some decent downside in the weeks following the momentum sell signal.
Aside from waning momentum, it seems nothing can slow this market down. Record Corporate debt, record low interest rates, and record Central Bank assistance has Global asset prices surging.
I mused yesterday that in 2007 consumers where using their houses as a piggy bank. In 2016 executives are using their corporations as a piggy bank.
Financing share repurchases and dividend payouts via debt has a tremendous upside when interest rates are low. But as prices rise is takes more money to augment share price. And if interest rates ever rise again.........
and perhaps that's the catch. Maybe the new normal is free money forever. Corporations can borrow for near nothing and spend away. A true Nirvana for the 1%. The boards of every corporation can continue the virtuous circle jerk approving every shareholder appreciation measure that comes their way.
But for now, lets watch momentum on the S&P500 ETF. Underneath yesterdays quiet day was a massive new 52 week high day. It was akin to watching a US Olympic basketball match. 300 to 1. 340 to 2. Does it really matter? Upside is winning right now. And the quiet market keeps saying "Don't short me"... because you are never supposed to short a dull market. But most times the market gets sharp a lot quicker than it gets dull.
With options cheap, but certainly not as cheap as corporate debt), we can look further out for possible pull backs. However lets wait for downside confirmation first.
See you in the chat room.
