Having plumbed the depths of despair in early 2016, market participants are now in a state of near-record euphoria. One indication of this comes from the latest NYSE margin debt data, which showed the biggest jump since April 2015, rising by $27 billion to $474.6 billion, the highest since last July, as investor net worth calculated by the difference of Margin Debt from Free Credit Cash Accounts and Credit Balances in Margin accounts, once again dipped lower.
Another one comes courtesy of Gluskin Sheff's David Rosenberg who in his daily note reports that "net speculative position on the CME as far as SPX contracts are concerned have ballooned nearly 70% since mid-July to 38,083 net longs, a bullish bet we have not seen since June 2013, and this is one vivid sign of just how complacent the masses are."
Rosenberg speculates that "the buyers look to have exhausted themselves at this point", even though it is still not clear just who the buyers are, with mutual fund flows rising on a weekly basis without an offsetting rebound in ETF inflows in recent weeks, stock buybacks declining and insider stock buying at the lowest on record.
He also points to the previously noted record collapse in asset volatility, namely the VIX which in recent weeks recorded its lowest prints in years.
Rosenberg's conclusion is that complacency and pervasive bullishness abounds, which is somewhat at odds with the constant refrain that the market is at all time highs because this remains the "most hated rally" in history.
His warning: “As per Bob Farrell and his Rule #5, ‘the general public buys the most at the top and the least at the bottom'."
That's true but Bob Farrell never explained just when central banks buy as well, which is topic now that even Reuters - more than one year after we first pointed it out - has an article describing how the "Swiss central bank steps up stock buying spree"