“Nothing really terrible or wonderful is happening other than that earnings are rising in record-high territory again.”
. . . Dr. Ed Yardeni, Yardeni Research, “Seinfeld Market: Nothing Bad Happening,” May 3, 2017
“Relax” is the debut single by “Franky Goes to Hollywood” released in the U.K in 1983. The song was later included on the album “Welcome to the Pleasuredome” in 1984. And clearly investors have been “relaxing” over the past seven sessions with the S&P 500 (SPX/2389.52) confined in a trading range of less than 20 basis points. Ladies and gentlemen, that has only happened twice since 1928! World famous Dr. Yardeni goes on to write:
The bull market in stocks since March 2009 has had a fairly simple script too. As a result of the Trauma of 2008, investors have been prone to recurring panic attacks. They feared that something bad was about to happen again, so they sold stocks. When their fears weren’t realized, the selloffs were followed by relief rallies to new cyclical highs and to new record highs since March 28, 2013. Their jitters are understandable given that the S&P 500 plunged 56.8% from October 9, 2007 through March 9, 2009. From 2009 through 2016, there were four major corrections and several significant scares. I kept track of them and the main events that seemed to cause them. By my count, there were 57 from 2009 through 2016, with 2012 being especially anxiety-prone with 12 attacks. (Attacks).
Dr. Yardeni is wicked smart, yet we take exception with him, and many others, as to where this secular bull market began. After the secular bull market of 1949 to 1966, the markets were “range bound” for 16 years (until 1982). The D-J Industrials (INDU/20951.47) made their “nominal” price low in December of 1974, but the “valuation low” didn’t come until 1982, and the real secular bull started when the Industrials broke out of that 16-year trading range in the fall of 1982. Fast forward, the nominal price in this cycle came in March of 2009. However, the “valuation low” came in October 2011 and the Industrials did not break out of the 13-year trading range until April of 2013!
NOBODY measures the 1982 to 2000 secular bull market from the “nominal” price low of December 6, 1974, but rather either the “valuation low” in early 1982 or the upside breakout of the trading range in the fall of 1982. We think that is the correct starting point for this secular bull market. If correct, this is not that far into the bull move.
As for the here and now, there is not much “internal energy” available here, implying any reaction to this morning’s employment payroll release should be muted. Accordingly, any upside breakout attempt above 2400 (basis the SPX) should also be muted. This “muted action” should last into next week, which should sink the “footings” for a rally to new all-time highs according to our short/intermediate-term trading models.
This morning, all is quiet on the western front with the spoos flat (+0.50) as folks await the numba’ and Macron stretches his lead in the French elections. Be bullish, my friends, be bullish . . .