Melt Up

I’ve always thought ‘Melt Up’ was a stupid term. Nevertheless, it appears to be applicable. By all measures my typical measures this market is overbought. The SPX is nearly two standard deviations above the monthly pricing average (and has been such for several days now). It’s well above it’s 50/100/200 day trading averages. And even more remarkable, there appears to be no end in sight.

Of course, there is an end. It may be just over the horizon. It’s just tricky to see in these conditions.

With the DJIA breaking through 29,000, there’s a general wave of optimism. A China trade deal? Optimism. And impeachment? Who cares?… The markets seem to have their eye on the ball right now.

Washington is a sideshow. Trade, while an issue, seems largely priced into expectations. So bad news is no news, and good news is worth pushing this market even higher. Every pull-back is met with buyers who want to get into the party.

Lets be clear: this won’t go on forever. And from a technical perspective, this thing is getting into rarefied air. Trying to peg numbers is a pretty exotic extrapolation.

On the high side, the SPX seems to be on a mission to break above 3300 — this week. That’s a pretty big deal considering the 2020 targets are 3573/3770 for the year.

On the low side, 3217 for the week. But there’s a much lower price point that may haunt us: 3145. This would be a much more material pull-back. But again, that number, while real, doesn’t seem to be on anyone’s radar this week.

In fact, this market seems to be looking for any reason to move higher. It would be a major concern if it weren’t for the general feelings of pessimism that still seem to be the flavor of the day. (Right about the time everyone feels pretty good about things should be the time we really start to worry)

Earnings season may begin to shift sentiment. But even that seems iffy. It seems as if this market is looking at earnings over a year out. As long as the global growth figures continue to climb, and the FED shows no signs of changing policy, the melt up has a good chance of continuing.


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