Yesterday, the S&P 500 extended Tuesday’s rebound and reclaimed 2,100 support. Volume was above average for the sixth consecutive day and shows there is far more participation in this market than the typical, dull summer sessions.
Chinese and European fears are fading fast. We passed the halfway point in earnings season without major problems. And the Fed is sticking to their script. In all, things are becoming boring, but given where we came from, boring is good and that is showing up in stock prices.
No matter how many reasons people have for not liking this market, prices are within two-percent of all time highs. When forced to choose between the crowd and the market, I always go with the market. It isn’t that the crowd is stupid, only that their opinion is already reflected in stock prices and there is nothing to be gained by trading with the crowd.
Contrary to popular opinion, prices don’t have to go down to price in bad news. Another way is by not going up. We’ve been in a tremendous bull market since the 2009 lows, but 2015 has been a dud as we’ve done nothing but drift sideways. Few would argue with me if I said this market would be significantly higher if we had been showered with good news. While we haven’t seen the 10% or 20% correction everyone is predicting, the difference between where we are now and where we would be if the news was better, is our “correction”.
This market has been given every opportunity to break down. If it was poised to go lower, it would have happened already. When prices refuse to go down, no matter what our analysis or gut tells us, stick with the market.