The Week Ahead: Don’t Worry This Bubble Market Turns Slowly

The stock market recorded nice gains on Monday but then returned to its narrow trading range since it has not had a 1% move either up or down for the past month. The Spyder Trust (SPY) has been grinding higher as it is up 1.3% during the period.

Even though the broad market gains have not been impressive the attitude of many professionals, as expected, has become a bit more positive. At the end of February I discussed why investors should not avoid stocks because of their fears over China, weak crude oil prices, earnings or a weak economy.

It was also important that with the close on February 27th “the weekly NYSE A/D line has moved back above its WMA for the first time since the start of the year”. The daily chart of the Spyder Trust (SPY) shows the both the bullish divergence at the February lows as well as the break of the downtrend in the A/D line.
Despite the pickup in articles that are more positive on the stock market more high profile bears keep coming out of the woodwork. In a letter to investors in his $28 billion dollar hedge fund manager Paul Singer thinks that the negative yields in many of the world’s bond markets has investors facing “the biggest bond bubble in world history” .

He also fears a drop may be very sudden and very sharp. I found it interesting that Elliott further stated “Everyone is in the dark….Experience doesn’t count for much, and extreme confidence may be fatal.” Is this possibly an excuse for the continued poor performance of the hedge fund industry? It has been my view for over two years that the hedge industry as entered its own bear market. (“The Bubble No One Is Discussing”)

In last week’s column I wondered why there was not any euphoria amongst stock investors despite the many proclamations of a major bull market top. The bond market is clearly a very crowded trade as nervous investors fight for yields but most bond traders I come across are nervous not euphoric.

http://www.forbes.com/sites/tomaspray/2016/08/20/the-week-ahead-dont-worry-this-bubble-market-turns-slowly/