Market Overdue for a Pause
One of the interesting things about attending a conference of fellow market geeks (which is not considered a detrimental term with this crowd!) is listening to the running commentary about the stock market action over the two days of meetings. To be clear, this is not a group of individual investors but rather a gathering of the National Association of Active Investment Managers, which requires its members to be registered investment advisors – I.E. investment professionals. And given that this is a group designed for “active managers” there is a fair amount of trading acumen in the room at all times.
At these meetings, the discussions of the tape action, market indicators, and model signals can often become rather spirited. As I’ve said many times, there are lots of ways to “skin a cat” in the stock market game, and often times the views and approaches discussed are diametrically opposed. However, at this particular two-day event, there wasn’t much in the way of arguing. I didn’t observe a single heated discussion. And in fact, there didn’t seem to be much disagreement evident at all (well, except for the question of who owed whom a drink from some bet that occurred two years ago).
While there may be more than one way to “get ‘er done” in the market (sorry, but we ARE in Dallas), the overriding goal of most managers in the room is to “make hay while the sun shines.” And given that the sun has been shining brightly on anyone holding long positions for more than two and one-half months now, I guess it makes sense that there wasn’t much to disagree on during the cocktail hour. (Even the one lonely bear I chatted with knew enough to keep quiet with this crowd.)
However, I can’t really say that the mood was jubilant either. With stocks moving a little higher each and every day, regardless of the news, earnings, or geopolitical events, it seems that just about everybody is enjoying healthy-sized plus signs in their accounts so far this year. As such, one might have expected a certain degree of bravado given the tendency of these guys and gals to use leverage with their strategies.
But again, this simply wasn’t the case. Cutting to the chase, the overriding mood amongst these quant-driven, trading oriented managers was more along the lines of… drum roll please… disbelief.
Those of us that have been around long enough to remember the days when trendllines required a sharp pencil and a ruler, and that the calculation of a moving average dictated an awful lot of numbers being punched into the calculator, can recall markets similar to what we’re seeing now. But for the younger crowd, there was an odd sense of nervousness displayed when the subject of the current trend-that-never-ends was brought up.
The point to this Friday-morning meandering missive is that what we are seeing in the stock market right now is rather rare. Generally speaking, the S&P 500 doesn’t advance nearly 30% in five and one-half months without so much as a 5% correction. Usually, the market doesn’t go up 10 out of 13 days during a month as it has in February. And logic would seem to dictate that waiting until after the S&P has nearly doubled may not be the best time to start bombing into the stock market. And yet, this appears to be exactly what is happening – day in and day out.
So, yes, the market is indeed overdue for a pause. And yes, many of us in that meeting have indeed been uttering those words for quite some time now. But as the saying goes, the trend is your friend – until it isn’t. Which may explain the looks of disbelief seen this week in Dallas.
Turning to this morning… This morning’s headlines include the move by the People’s Bank of China to hike reserve requirements for the second time this year, a spike in overnight borrowing in Europe, and talk of rate hikes in England. However, through it all, the futures have steadily improved on this options expiration Friday.
On the Economic front… There is no economic data on the calendar today.
David D. Moenning
Editor: Top Guns Trader
