Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Giddy "buy the dip, the Fed's got our back" participants tend to forget that major players profit from going short when all the other shorts have been terminated with extreme prejudice.
During the previous unreal estate and stock echo bubble I, the SPX rose 14 out of 17 months from Jun '06 to Oct. '07, 8 months in a row during the initial increase.Leading up the the tech bubble high in Mar. '00, the SPX rose 12 out of 19 months from the Sept. '98 low, 8 out of 10 months during the initial increase.
The SPX rose 12 months into the '87 high, 10 of 12 months being higher.
From the low in Nov. '71, the SPX rose 13 months into high in Jan. '73, 11 out of 13 months being higher.
Into the 1937 high, the SPX rose 21 of 25 months from the low in spring 1935.
The blow-off move into the 1929 high was up 16 months in a row and 18 out of 20 months.
We're in the 12th month of an uptrend since Jun '12, 11 of which have been up.
It's been 20 months since the Oct. '11 low, 16 of which have been higher.
The current bull market move is among the strongest, most persistent in US history, rivaling the increases into the 1929 and 1937 highs.
The SPX is 65-85% above implied fair value based on the 6-year change of reported earnings and the avg. P/E of 13-15.
The central banks have yet again created a stock market bubble rivaling or surpassing the most overvalued secular bull market peaks in history, and this time they REALLY mean it.
What's more profitable, a slow melt-up or a panic sell-off and sharp rebound? Definitely the latter, if you're heavily short, the market is teetering on record margin debt and you can kick out the critical 2X4 holding the whole contraption up.