It is obvious that the US markets are in a bull market. The 13-year resistance levels of around 1565 were blown through like a hot knife through butter recently. The discipline of Technical Analysis demands that we acknowledge this very significant development as outright bullish, and trade accordingly. There is a strong case for the development of a new bull market – one that could last for several years. It is my intention to play that bull market for all I can, just as I traded the sideways market over the past 13 years via appropriate trading techniques.
However, at this juncture it appears that at least some level of speculation has entered into the markets.
Beyond the sentiment indicators mentioned on my last BNN appearance (see last weeks blog), there are a couple of other signals for investors to heed when deciding if now is the time to invest new money in the ever-rising US stock market. According to Bloomberg, NYSE margin debt hit $380 billion by the end of March. That’s pretty much the same level of margin debt that investors committed in July 2007 ($381 billion).
Meanwhile, Barclay’s US High-yield bond index just hit an all-time low yield of below 5% (i.e. new high in price). It would appear that both equities and corporate debt – even the lowest quality debt – is priced for perfection. I continue to be longer termed bullish, but cautious in the near term. The longer it takes for a significant correction to appear on the markets, the more significant that correction will likely be.