"I am the poet of the high wire -- I never do stunts; I do theatrical performances."
An attempted coup in Turkey that is hastening the development of a theocracy is the latest international event that the stock market is ignoring. Instead, a massive acquisition of ARM Holdings (ARMH) by Japan's Softbank is the latest evidence that an endless flow of cheap capital is the salve for all our problems.
The indices are at nose bleed levels, when it comes to being extended, but none of the dramatic headlines we have seen lately are capable of putting a dent in the uptrend. Terrorism in France, police shootings, the most-hated Presidential candidates ever, Brexit, economic chaos around the world, negative interest rates and endless financial engineering by central bankers are having no impact on the price action. "It's all good" seems to be the mantra.
There are very logical and compelling bearish arguments in every market. That is the nature of markets, but even the bulls have to admit that the list of negatives is particularly long right now, and after a seven-year run, you have to wonder when the cycle is going to turn. We have been hearing for years now that disaster awaits, but it is only those that fail to embrace the market that are suffering any real pain.
Ironically, it is the fact that the negatives are so profound and so obvious that keeps the market running. Many bulls are only half committed to the market, and always seem to have a good supply of buying power in reserve. It is classic "climb the wall of worry" action. There never seems to be real celebration or euphoria. There is just disappointment about not being more heavily invested. The bulls just keep on unleashing that untapped buying power -- and higher and higher we go. The ARMH acquisition this morning is a good example of how cheap money keeps driving prices. It is a deal that couldn't be done in a normal interest rate environment.
Although it isn't very scientific, the best approach to this market is to stay focused on price action and let it be your guide. Many of the big-picture bears scoff at such an idea. They are convinced that doom lies ahead, and we better be ready -- but without proper timing, it is a very poor way to approach the market.
The only way to time a market turn with any precision is to focus on price action. Sure, you won't time the exact moment that the market turns, but reacting to market conditions is likely to be much more precise that anticipating them.
While the indices present some major challenges, the good news is that there has been some better stock picking lately, and with earnings season starting in earnest this week, there is likely to be more. There is always speculative money out there looking for action. The bears will tell us that this an indication of a late-stage bull market, but that doesn't mean that there aren't trades to be had.
It is very hard not to be concerned about the possibility of a major market shift -- and we have to be extremely vigilant -- but until there is change in market character we have to keep on looking for long-side trades.