The Silence of the Bears, by the Northman Trader

The bears haven’t entirely vanished, but we’re certainly taking a low profile these days. From the Northman Trader at northmantrader.com:

The silence of the bears is deafening. And who can blame them? The last 2 years have been absolutely brutal for any fans of price discovery, volatility and anything analytical mattering. Nothing matters. Be it divergences, valuations, earnings misses, slowing data, yield curve, equal weight, internals, catastrophes in nature, slowing loan growth, slowing auto sales, slowing real estate, retail apocalypse, debt levels, etc…I can drone on. Nothing matters. Markets keep drifting higher despite it all.

Price discovery as we used to know it, the back and forth of buyers and sellers engaging in the argument of forward valuations based on expected earnings growth, has ended with the disappearance of sellers as part of the normal market functioning:

Corrections as a means of price discovery don’t exist any more. Every day we don’t have a 3% correction is a new record in length of time without any such correction. And the chart above illustrates this adequately. It is a global phenomenon, it’s not only US based.

5% corrections, what also used to be regular part of markets and a bare minimum at that, have also disappeared:

Not quite at a record, yet the message is nevertheless clear: There’s not much happening in these markets on a day to day basis.

The abomination of what passes for intra-day trading ranges these days illustrates the point quite nicely:

Whatever downside does occur can’t sustain itself for more than minutes, a couple of hours at best. Case in point: The $DAX was only negative for 1 hour 16 minutes after the surprise collapse of German coalition talks on Monday. Nothing matters.

Hence it is no surprise sentiment is as bullish as it is. Recall allocations are all bullish, people, funds, even central banks all own the same shrinking universe of stocks.

To continue reading: The Silence of the Bears

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