Today’s Investor’s Business Daily ran a headline in their “The Big Picture” column stating: ‘Stocks Trade Quietly As Bearish Pundits Remain Few ‘.
It was the “bearish pundits remain few” phrase that caught my contrarian eye. When euphoria sweeps the market and no one is crying wolf, I get concerned.
True enough, the S&P500 keeps setting record highs, and the market recovered extraordinarily well this week from concerns over Russian/Ukrainian relations. But the price/volume action continues to haunt. No trading session in the past four weeks has matched the heavy volume selling seen in early February.
Despite possible cooling of hostilities in Ukraine, the other concerns remain- emerging markets are still soft, poor retail sales are blamed on cold winter weather, and Obamacare uncertainties are getting more uncertain.
Some of the bright spots might also be misleading. If employment continues to improve, it will ultimately result in higher wages which in my opinion will hurt productivity more than helping grow revenue. [Consumer deficit spending is way ahead of wages.] Additionally, although the Fed has promised to keep rates low, they may not be able to deliver. The 10 year treasury is creeping up, at the same time the dollar is declining.
Conflicting indicators can either be a sign that the market is correcting or that it’s uncertain. Either can be an early warning of pending turmoil.
For now, I’m remaining cautious and have taken profits…perhaps early. Time will tell.