There really isn’t anything left to be said about this raging bull market that I haven’t already covered in the past week or two. It wants to go up and will continue to go up until the last buyer has been found. Which may be tomorrow or it may be months from now. Who knows?!! But what we do know for sure is that being short in this market is going to be a very painful experience. Or is it?
I’m a bit of a history buff and beside general curiosity it’s for a very pragmatic reason. Looking back in time teaches you a lot more about human nature and the way the world works than the most erudite of academics or philosophers. The quote ‘never let a good crisis go to waste’ has recently been attributed to Rom Emmanuel but Winston Churchill is claimed of having used it and most likely he himself picked it up somewhere during his long and eventful life.
With equities not just reaching but far exceeding stratospheric levels the question of how much longer this can be sustained obviously comes to mind. In fact it’s the prevailing sentiment in light of a face ripping rally that is unparalleled in financial history. I have repeatedly pointed out the obvious disconnect between the stock market and what has transpired across Main Street. Not just all over the United States but also in the rest of the Western hemisphere, which continues to be on the receiving end of various well intended policy decisions.
I looked at the VX futures term structure this morning, i.e. the series of VX futures contracts from now into late this year, and something occurred to me. For over six months now I have been plotting various changes in this curve in exhausting detail and the story it’s been telling us has remained largely identical. Big trouble ahead! So how come the market continues to push higher and higher with the SPX officially marking new all time highs as well as reaching the coveted $4,000 mark?