Market action last week centered around B.S. Bernanke’s remarks that juiced the stock market Monday—leaving the remainder of the week an afterthought. AAII investor sentiment registered even less fear than the previous week, remaining very bullish. Following suit, the VXO ended the week almost unchanged, confirming the low-fear syndrome. Trading volume remained anemic.
We’ve now reached a consensus among the advisors whom I respect that the end of this bull draws near. Recent history gives reason for pause. “Sell in May and go away.” IRA contributions for 2011 must be made by April 17th. Greece, Ireland, and France each have elections scheduled in April and May.
Last year, the S&P 500 Index peaked April 29th while the intra-day peak occurred May 2nd. Two years ago, the closing peak occurred on April 23rd, and in 2008 it happened on May 19th. What about 2009? Oh yes, I remember. The Fed and Treasury threw everything but the kitchen sink at the market (and zombie banks in particular) to prop it up and keep it from falling into the abyss. That has been known as the “Haines bottom” that he (Mark Haines) called March 10, 2009.
While market timing is not for the faint of heart, and I certainly cannot predict the future, the end of this cyclical bull may finally be in sight. Even Adam Hamilton admits the stock market here is overbought but hangs out hope for a couple more months of this nonsense—perhaps since his picks for this bogus run are uncharacteristically badly underwater.
Rather than the zombie banks leading the way last week, it was IBM, GOOG, and AAPL (speaking of overbought). There seems to be no limit to the amount of overreaching going on thanks to the Fed’s blatant, shameless, and very damaging manipulation of money and markets.
Do they dare institute QE3 unprovoked? I doubt it. With gas prices again soaring and a presidential election looming, even Bernanke has enough sense to not openly stimulate the stock market and fan the fires of inflation without good reason. He realizes such action would subject him and the Fed to accusations of acting politically. He and the Fed have (justifiably) taken a lot heat lately. They would be fools to invite more. Of course, they could create a nice panic, as they did four years ago, to justify doing QE3, but short of that, I’m just looking for more hot air.
Finally, don’t miss this article, richly populated with excellent charts and graphs, that presents fascinating insights into Austrian Economics.