Authored by Sven Henrich via NorthmanTrader.com,
As promised a bit more color to some comments I made this morning on CNBC. Look, I’ve been pretty clear I think: The trifecta of dovish central banks, record buybacks and the constant dangling of the China trade deal carrot has been massively supportive of equities during the first 2 months out of the year and ultimately perhaps that is enough to keep markets on a bullish trajectory BUT, and this is the big but, the case that this all has been a bear market rally is not invalidated as of yet.
This rally so far in 2019 has a bit of a Deja Vu feel compared to last year and markets may be repeating the sins of last year:
Relentless drift higher, volatility compression, vast technical extension of select stocks amid building negative divergences, and massive optimism and any negatives ignored. Last year it was tax cuts that drove the optimism, now it’s hope for a China trade deal.
Big differences to last year:
The rally then was driven by expectations of record earnings growth, 3-4% GDP growth, now earnings growth is slowing or regressive and GDP growth has slowed down. Call last year the Four Seasons rally as everything was gorgeous, call this year the Motel 6 rally as everything looks rather shabby from a fundamental perspective.
So why the rally then into the 2800 range now? Because it has morphed from a technical bounce rally to the most jawboned rally in history: Non stop dovish Fed speakers on the one hand, and non stop carrot dangling of a China trade deal on the other hand.
My point in the interview about Magic Risk Free Fridays:
more with charts
http://www.zerohedge.com/news/2019-03-07/curb-your-enthusiasm?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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