Thursday, January 6, 2011

Market has Essentially Pulled Back Once in 25 Sessions

What has been remarkable about this run - yet another "V" shaped move - is not the run up itself, but the lack of any pullback.  Aside from today the S&P 500 is up 20 of 25 sessions.  Of those 5 down sessions, 4 have been 0.16% or less.  The other session was -0.5%.  +/- 0.1% is a rounding error in the big picture, so effectively 24 out of 25 sessions have been flat or up.  That's ridiculous.

Jeff Saut - strategist at Raymond James - says a normal bull market run is 25 to 30 sessions.  This one is approaching 90 sessions.  He has never seen that in 40 years.

We saw similar "non stop up" runs with no pullback in September and October 2010.  Indeed, if not for the crisis in Ireland in November, we might be on the 5th month straight of no real pullbacks.  The action is completely out of character for a 'free market'.  Even NASDAQ 1999 had sharp pullbacks from time to time within its parabolic move.

As I wrote this past fall, the only time the stock market acted 'normally' since the call for Obama to "buy stocks" (March 09) in my view was between late April 2010 and early summer.  (excluding the 'fat finger' of May 6th) That was also the only time since March 2009 we have not been operating under QE1, QE 1.5 (reinvestment of MBS runoff) or QE2.  I don't think it is a coincidence.  While at this point even the bulls are crying out for a pullback so they can get more long exposure, I don't expect any form of normal to return to the market until the Fed stops handing $8 to $10 billion a day to primary dealers.  So yes PIMCO we do have a new normal.... ponzi style.

p.s. for all those crying the market is cheap or a great value, small caps now trade at 32x earnings.

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