Without ongoing manipulation from central bank jiggers, brazen HFT skimmers and corporations un-GAAP’ing their earnings and blowing up their balance sheets to buy back their own shares, the stock market would be a fragment of its present level today. That much is clear. The harder questions are to what end and where next? Bulls think the sky’s the limit and none of this matters so long as prices are going up!! Bears worry that the farce is a farce and inherently unsustainable.
After bouncing back 13% since February 11 (similar to previous moves in October 2014 and 2015- in green bars below) the cyclical trend for the broad markets remains negative to date. The below chart is of the 1900 company NYSE composite Index courtesy of my partner Cory Venable and captures the big picture of a market which remains more than 9% below its highs of last May.
Note to bulls: making back losses is not investment progress and higher prices on lower fundamentals do not make assets more ‘attractive’ as investments, just the opposite. With central bank announcements in the rear view mirror once more and investor flows continuing to exit into rallies, the question is who or what can continue to prop up an over-bought, dramatically over-valued market from the weight of a global downturn in revenue?
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