Maybe it's you who's in a bubble!
What leads me to believe that this will resolve higher?
Well other than the fact that we know that the more times a level is tested, the higher the likelihood that it breaks, take a look at what the leader in Europe is doing:
New All-time highs for the German DAX. This is after half a decade of no progress.
For goodness sake, even Deutsche Bank is making new 52-week highs:
Stocks are going up. More of them are participating. More sectors and industry groups are breaking out to new highs, not fewer ones. More countries and continents are breaking out to new highs.
I'm not sure why this should be a surprise to anyone. The lack of a bid for the defensive trades makes it mathematically impossible for stocks not to go up. These things need to catch a bid: bonds, yen, staples etc if this is a market we should be shorting.
They haven't though...
When we're getting bearish equities and putting on aggressive short positions and defensive trades, expect to see these 4 lines rising. See Jan 2020 and Oct 2018.
They're not....
Something else we should expect to see is a spike in new lows.
One thing I think is important to point out is that we should expect the 52-week low list to stay quiet for a while even if stocks do start coming under pressure.
Most stocks are really really far away from 52-week lows. So for now, I think it's important to observe the breadth on a more short-term horizon, specifically the 21 day and 63 day lows:
To be clear, we haven't seen much action in these lists, yet.
But it's certainly something to watch in the same ways as the Aussie/Yen, Staples relative and Gold & Bonds vs Stocks, as mentioned above.
Stocks are going up. Spending our time looking for stocks to buy has been much more rewarding (see here) than if we had spent that time looking for stocks to sell.
That's worked.
Based on the evidence mentioned above, as well as a lot of other data that we'll discuss on Tuesday's call, we see no reason to change our strategy.
Should we be actively looking for stocks to short? Well we are, kind of, but they've been hard to find.
Buying breakouts has served us much much better.
I think it will continue to.
January's Conference Call Tuesday
We'll be holding our Live Monthly Conference Call on Tuesday, January 19 at 6pm Eastern time. Premium members, click here for registration information.
We have a lot to discuss from the breakouts in countries around the world, inflation signs like CRB Index, Crude Oil and Rising Rates. We're going to break down the benefits of owning small-caps and mid-caps, both over the long-term and in this particular environment.
Sector rotation is the lifeblood of a bull market. If you're ever wondered what sector rotation looks like, just study the past 10 months and you've got a PHD
- JC