Tonight’s free webinar will explain why the bull market for stocks is racing higher and why it is not likely to stop any time soon. If it does make a sudden reversal, it will give out a signal as obvious as the moon-walking pooch from Skechers (SKX) popular Super Bowl commercial.
The current market condition is the subject of the free webinar I’ll be hosting today. Now to many investors it might look like the market is irrationally moving higher and must fall back into a serious correction very soon. I admit that there is good reason to expect such a pull back. Negotiations over Greek’s effective bankruptcy are still on the brink and a deal may not be reached in time. Certainly a Greek default would be alarming news to the market, would it not? Actually, no it wouldn’t. Not now.
Six months ago it was alarming news. It was among the bigger components of the late summer bear tear that plunged stocks and currencies alike into a steep slide. But if technical analysis has any value (and I believe it does) then the markets are clearly signaling to all who care to look that the Greek default has already been priced in. Markets are now ready to weather the storm regardless of the outcome.
Consider this weekly chart of the CBOE Market Volatility Index (a.k.a. the VIX). Many an analyst would look at this chart and appropriately point out that the market is at a point where it is ready to increase in volatility. Now in case you don’t know, the phrase “increase in volatility” is market analyst jargon for the idea that prices are about to fall off a cliff. After all, why shouldn’t we expect an increase in volatility? The VIX is right at the level where it dramatically rose last time, right?
That’s a true statement, but it is equally true to point to point out that this level of the VIX (around 17.5), was the same level the VIX settled to in January of 2003. That was, of course, at the beginning of a 4-year bull market run. Since the VIX is a measure of how many investors are buying put options (those that fear falling prices), its current level is a clear indication that the market is not in fear of Greek default.
The issue is too noisy and too capable of causing broad impact for the market to be unaware of its implications. This market behavior can therefore only be explained by the idea that stocks are more interesting than bonds right now, and that no permutation of the myriad possibilities in the Eurozone can seriously affect the value of stock investments over the long term.
If that is so, then a better question is whether the market will continue to race forward like the aforementioned feisty French bulldog (eclipsing both greyhounds and Kim Kardashian simultaneously). My bet is that it will, at least for a little while longer. If you care to find my answer to that question, click here to listen in to a free webinar where I’ll show you how much longer I think it can go and what will be the signal of its reversal—should it come. Hope to see you there!