Weekend Market Commentary: Saturday Edition

Written by Gary

Weekend Market Commentary: Why The Bull Run Will Continue

UPDATED: 0900 EST 2014-09-13

The bull run we have seen for the past five years is nowhere near ready to roll over and slide down into the dark pools of finances lost. Yes, the major crashes began in October, but there have been MANY Octobers in between the 1907, 1929, 1937, 1987 and 2008 crashes and this October isn’t likely to be the one.

A minor sell-off maybe, but NOT the BIG one, the reasoning is quiet simple.

All you have to do is read all the bearish articles lately. At least 50% of the articles on Seeking Alpha are bearish; full of doom and gloom. That type of prediction is typically a bullish scenario or at least it has been in the past. It is when the ‘Sheeples’ dive in and start buying everything in sight that we should start to worry about a market sliding to the south.

This bull run will continue until all the authors preach and sing the songs of a continuing bull market and that hasn’t happened just yet. This bull market has been on an upward trend since 2009, with some ‘minor’ corrections along the way that allowed the BTFDers to reap excellent profits.

Stocks do have more room to advance and will remain that way for some time to come as leading indicators support the hypothesis that we are NOT at a top and any recession is at least a year away.

However, this author, Chris Puplava, believes the countdown to another market peak has begun. He cites the problem with the Fed keeping interest rates low, current inflationary trends, believes the ISM should be peaking and then experience a decline heading into the end of the year. While this is true and this aging bull run can not go on forever. The impenetrable financial barriers that will eventually become a force to be reckoned with is not here yet.

He also states, “This implies both the economy and stock market should enter into their sixth year as neither are likely to peak in 2014.” The issue here is whether or not you believe this would be enough to cause the market to decline more than 10%.

Stock Traders Daily, writes a ‘Chicken Little’ scenario that very much like other bearish prognosticators in that ‘someday’ they will be correct, but don’t exactly say when the market’s sky will fall or what the catalyst will be. Again more proof the bull will reign high for now.

Sell Apple And Prepare For A Market Crash

According to our observations, the market is significantly overvalued, earnings growth rates are poised to decline, but the price-earnings multiple levied on the S&P 500 at this time, almost 18 times earnings, suggest that earnings growth will remain robust. Our analysis suggests that earnings growth will instead become slower than it was, and not accelerate like analysts suggest.

One reader commented, ‘Should you retract this and say that you have a level of confidence that could be absolutely wrong? Folks are pouring money into the market because of all the uncertainty globally. That is the current stimulus. Let’s revisit the market crash for another day.’

Capitalist Exploits, seems to have it right in their article below. Current thoughts running around the office is that there is another two years left in this bull market with a few ten percent drops along the way.

The Bubble Is In Cash, Not Stocks

Summary

• High cash levels equate to a huge pool of marginal buyers, rather than sellers, for stocks and other “real” assets.

• Cash levels more or less the highest in a generation.

• However one looks at it – cash is still a way more popular investment alternative than stocks.

• If consumer confidence is anything to go by, we are probably only half way through the current bull market.

• I think to a large extent the rise of the stock market in the past 5 years has been driven by corporate buybacks.

This leads us to a very interesting situation and looming disaster for those who aren’t invested in stocks! Consumers (who are ultimately the buyers of stocks) have the highest cash levels in a generation, combined with the liquidity of stocks that is probably the lowest in a generation and you have the recipe for the best is yet to come in the stock market. Yes, the rally in stocks is likely to continue for many months and the performance may well rival what we have seen over the last 5 years!

Tomorrow in Part II, we will discuss why you Don’t Step In Front Of A Runaway Train. What are your thoughts? I would love to hear from you.

“The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction. Where that is, I do not know.” – Alan Greenspan, July 30, 2014

(Follow Closing Market Averages at end of this article)

WTI oil closed Friday at 92.90 +0.07    (+0.07%)

Brent oil closed Friday at 97.89 -0.20    (-0.20%)

The Demon The Gold Bears Are Mistakenly Overlooking

Gold closed Friday at 1,238.30 -0.70    (-0.06%)

Copper closed Friday at 3.089 -0.004    (-0.12%)

US Dollar closed Friday at 84.45 -0.02    (-0.03%)

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Written by Gary