"Breadthless" Stock Gains Defy Economic, Bond Market Realities

Strong economic growth and low unemployment rates signal - as explained by President Trump at least - that you've never had it better America. Top that package of awesome off with an ever-increasing stock market bow and only a fool would argue that these are not the best of times and that we have reached a nirvana-like plateau of ongoing prosperity... right?

Of course the picture of a full employment economy is tarnished a little by the lack of participation...

 

And while hope-filled economic growth forecast for the year push on to cyclical highs, 'real' economic data is gravely disappointing...

But as fast as the economy is supposed to be growing, the stock market is outpacing it - sending Warren Buffett's favorite stock market indicator to pretty much its highest levels ever...

And as disappointing as the economic data becomes, high-flying tech stocks remain impervious...

Ignoring the bond market's long-term view that all is not well in the US economy...

And the short-dated rates market's view that recessionary pressures are building (as the eurodollar curve has now inverted) - but cyclical stocks continue to buck that trend relative to defensives, ignoring the growth fears increasingly priced into credit markets...

So to summarize - stocks know better than the bond and eurodollar market, have seldom been so expensive and refuse to fear anything in the 'real' economy, or price in the potential for anything negative to ever happen anytime ever again.

*  *  *

There's just one thing... as stocks continue higher, supportive breadth is utterly collapsing.

As Morgan Stanley notes, and is extremely evident in the chart above, the percentage of Nasdaq numbers making new 52-week highs versus the Nasdaq composite price level.

We know there are issues with comparing stationary to non-stationary series, but nevertheless we make two simple observations:

1) Since we started our defensive rotation call in June, the number of stocks making new highs has been in a clear downward channel with lower lows and lower highs and

2) the index price level has continued to press to near new highs. 

In other words, fewer and fewer stocks are carrying the burden of lifting the market, a sign of exhaustion and, in our view, a bad signal for further price gains.

*  *  *

So the simple question is - who do you believe? Which market do you trust? The increasingly narrow 'basket of stocks' that are maintaining the illusion of prosperity for the masses - or the hard economic data and beliefs of the bond market?

Comments

Prehuman Insight Mon, 08/06/2018 - 14:38 Permalink

Deep Snorkeler

Sadly, I must announce the passing of the famous Deep Snorkeler.

Affectionately known as "Deep" or "Snorkie," this brilliant Phi Beta Kappa graduate will no longer be posting.

He was well known for his deep wisdom and witty commentary. He was last seen surfing off Paukukalo, Maui, in July.

In lieu of flowers, make contributions to:

1. the Donald J. Trump Foundation

2. the Trump Family Legal Defense Fund

Aloha

Clock Crasher Cryptopithicus Homme Mon, 08/06/2018 - 14:47 Permalink

The only thing that can stop this is The People of America wake up and stop supporting this usury-debt-based system of mind control.

Good thing for us, we do not have The People of America anymore.

We have citizens of the United States Corporation.

So chances of a market crash are 0.00000000001%

They know it.  You know it. 

The collapse is the collapse of consciousness and Spirit.

The collapse already occurred.  Don't look for a electronic equities market meltdown.  Just look around you. 

In reply to by Cryptopithicus Homme

Clock Crasher Cryptopithicus Homme Mon, 08/06/2018 - 15:16 Permalink

money is not real.  currency is an invention of man.  Tally sticks, gold, silver, commodities, fiat currencies, crypto currencies -All illusions.  All mind control. 

There are only two true currencies, spiritual currencies. 

Time & Attention

You Spend time

You PAY attention

Money = Mono Eye = The one  eye, christ consciousness (or whatever other word you want to use).

The anti christ consciousness is currency.  So it is a MegaPsyop attack on humanity to call fiat currency money.  You spend your life in the pursuit of the love of money stepping over your fellow man to get a cut of that sweet sweet pie to arrive at the One-Eye.

When the whole time the "money" was inside you. 

(using the word "you" loosely)

I may not have done a good job explaining that BTW

 

In reply to by Cryptopithicus Homme

AlwaysLearning24 Clock Crasher Mon, 08/06/2018 - 14:59 Permalink

What do you mean? The stock market always goes up regardless of population growth, energy availability, or political regime? It's a law of nature! /sarc

 

Maybe people will wake up and realize that their dollars are being inflated away instead of "compounding and growing".

 

It's going to be interesting as the stock market can't always go up.

 

 

In reply to by Clock Crasher

Clock Crasher AlwaysLearning24 Mon, 08/06/2018 - 15:13 Permalink

Stock markets are mutually exclusive from the 3 dimensional newtonian world, Earth.  Earth is finite because it exists in reality.  Stock markets exist in the collective imagination of computer processors, they can compute mathematics that involve infinite variables.  So things like Nasdaq 8,000 and S&P 3,000 and Dow 30,000 are not unlikely they are unavoidable.  

Commodities exist in the physical world.  So they will be crushed in parallel with the crushing of purchasing power.

Look at a chart of equities and commodities from 2013-today. 

One is hyperinflating

The other is being crushed

In reply to by AlwaysLearning24

Sonny Brakes Mon, 08/06/2018 - 14:50 Permalink

The retail investor is long gone. Eighty-five percent of the stock market is institutional investors, but hey, if the other 15% want to keep giving them money they will keep taking it.

MusicIsYou Mon, 08/06/2018 - 15:12 Permalink

I don't care if rich people hoard all the wealth, they don't have a soul thus they have to acquire wealth now, today. Eh, if I have to wait a 1000 years it's no big deal. They have to acquire millions of years of stuff all in one life time, because they won't be around in a 1000 years to get some.They'll probably be inside the mouse I squash in my field. Lol, people have no clue that what I just said is more true than you could possibly imagine. It's the notion of there being no tomorrow that fuels greed. They're just stoning themselves, but apparently that's what they want to do.

The Real Tony Mon, 08/06/2018 - 15:12 Permalink

When the hell are the arrests going to begin? I could see a dead cat bounce in 2009 then a continuation of the bear market but even the noose isn't enough for these stock market rigging and manipulating criminals.

Prosource Clock Crasher Mon, 08/06/2018 - 18:39 Permalink

Arrests and justice ARE coming.. Maybe not in this life, but ultimately, no one gets away with anything. Whether anyone likes it or not (in fact most will weep and wail and knash their teeth remembering the opportunity for mercy they have rejected), there is coming perfect and eternal justice; not according to imperfect human opinion or man's comparison against each other, but against a righteous standard of perfection. No need to about anyone's 'arrests' or justice.

In reply to by Clock Crasher

MusicIsYou Fiat Burner Mon, 08/06/2018 - 15:48 Permalink

Ah big deal, they're just slowly getting stoned by their own greed. And they walk around like they really have something, but they do not, and nobody who is somebody wants to be them. It's like Billy Joel's song Piano Man. "And the waitress is practicing politics, while the businessmen slowly get stoned. They're sharing a drink they call loneliness, but it's better than drinking alone."

In reply to by Fiat Burner

MusicIsYou Mon, 08/06/2018 - 15:40 Permalink

What is it now, some 2000 billionaires in the world, and some 15 million millionaires? Well you know how that saying goes, "Misery loves company."

MoreFreedom Mon, 08/06/2018 - 17:15 Permalink

Those more interested in the return of their principle than the return on their principle, inquire as to the best place for that purpose. 

Seems to me, companies that generate a profit via production of goods/services will continue to have value, while fiat currencies and bonds may not.  Physical assets may be even better, but transaction costs eat a good portion of that.  Even gold has a transaction cost of at least 3% if you're lucky.