Something for the Bears to Hang their Hats on

The Dow hit yet another all time high today and there hasn’t been a 10%+ correction in 35 months. When stocks opened sharply lower on July 10th, the bears came roaring out of hibernation calling for everything from a 10% correction to the end of the bull market. It was a sea of ugly red prices on my screen due to Portuguese bank worries, and weak China data. That decline didn’t even last a full day. Nor did the decline based on the -2.9% GDP print or Yellen’s previous press conference or a host of other headlines that were quickly absorbed.

I just cannot understand why more people are not excited about this market. It has truly been a bull market for the ages. The masses just keep hating and disavowing and predicting doom and gloom while the rest of us are smiling ear to ear for as long as we can. Bull markets do not end overnight and while this one continues to be old and wrinkly, it is generally healthy.

Because I am running out of ways to celebrate after all these years, I thought I would spend some time exposing some of small cracks in the pavement.

What can the bears hang their hats on?

For now, the S&P 400 and Russell 2000 are seriously lagging the Dow, S&P and Nasdaq. High yield bonds, a major canary in the coal mine, have been lagging for almost a month. The NYSE advance/decline line has not confirmed the recent all time highs and has been lagging all month.

Is that enough to end the bull market? Hardly, but it could certainly spell market pullback at any given time. Have we had these types of warnings before? Yes, many, many times during this bull market with most common outcome being a short-term pullback.

Weakness remains a buying opportunity and the Dow should continue to power higher to 17,500, 18,000 and perhaps even higher before all is said and done.

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Short-Term Pullback Continues

Stocks head in to the new week with the bears in control over the very short-term. That’s it. Not the intermediate-term and certainly not the long-term. The major indices peaked last Monday and look like they are digesting the recent gains in very orderly fashion. More all time highs should follow when this pullback concludes.

The next rally is the one I would pay particularly close attention to, especially in the small caps. The Russell 2000 is SUPPOSED to hit fresh highs. Should it fail when the others do, it would then open the possibility for more a more substantial decline, perhaps in the 5-9%. But that’s getting way ahead of ourselves.

For now, let’s see which sectors decline the most and entice buyers first. I also want to see how one of our biggest positions in long-term US treasuries performs. They are poised to see new highs for 2014 over the coming weeks as I have written about ad nauseum here. The trade from late 2013 is certainly long in the tooth by my standards and sentiment is beginning to bare that out.

Finally, it’s FOMC week and I will have more to say on that topic tomorrow and Wednesday.

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