Marketview: Bull Market Basking in the Sunlight



When bull markets start the fog of uncertainty is so thick you can barely see an inch in front of your face. As time progresses and market returns pile up, the trend becomes more obvious. When the fog has completely lifted everyone can see with crystal clarity what’s going on. The problem is that when everyone can connect the dots, most of the profits are no longer available. You never know how long the sun will shine, and when it stays for a while, plenty of people will start to look and feel like geniuses. This is when you want to start paying attention and looking for an exit. The early stages of a bull market have lower real risk, and higher perceived risk. The late stages of a bull market have higher real risk, and lower perceived risk. This insight cannot get you in at the bottom and out at the top. In fact, being overcautious will in a runaway bull and overly optimistic in a crisis will cost you lots of money. Try and make smaller decisions and always stay solvent for the next cycle.

Gaps and Reversals

Very active week with big trading ranges and a busy economic calendar. We had a combination of gaps and reversals in nearly every session this week. It seems that most portfolios are not constructed for increased realized volatility. This theme extends to major news events, as well. Both GDP and the jobs report  topped expectations. The ECB surprised many by cutting the main interest rate to 0.25%. Twitter blew the doors off it’s IPO. Legendary hedge fund SAC Capital plead guilty to insider trading and will write a check somewhere in the neighborhood of $1.8 BILLION. Not to be left out, France was downgraded to AA by Standard and Poors.

Price, Breadth and Rotation

Small-cap stocks are no longer leading the rally and breadth feels a little thin, yet the broad market continues higher.


Everything big moved higher. Viewed using a different sector breakdown, conglomerates outperformed everything by a wide margin. Financials may buoy the market on further strength.


Super-smart or Not Stupid

There are a million narratives you can spin about momentum, fund manager incentives, bubbles, analogs, sentiment, and liquidity. All we can see is that markets have been going up for a long time and they’re still going up for now. The time to be super bullish was then the fog was thick. The time to be less bullish is when the sun is shining. If you’re waiting for a crash, the market must make a lower low first.


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