Bears always sound smarter than bulls. Pessimism simply sounds more intelligent than optimism. Anyone that has been involved in the market for a while knows that betting that something will go wrong is usually the best course of action.
The problem with most bears is that their timing is terrible. They are good at telling us what is going to go wrong, but very bad at predicting when it might happen. Typically, they justify their premature predictions by pointing out how stupid the buying bulls must be.
I try not to play the prediction game, but I am wondering if we are starting to see a shift in the character of the market action. For a while now, the market keeps trending higher, but there is little energy. That has been due in part to complacency created by dovish central banks.
Maria Draghi of the European Central Bank, made dovish comments Thursday, but they didn't produce the sustained buying that many are used to. Facebook (FB) posted very strong numbers, yet the strength was aggressively sold and the stock is down 2.5%.
Thursday night we have more important earnings and the market is acting as if it's nervous that maybe there will be a negative response like we are seeing to Facebook Thursday. Next week the Fed makes its interest rate announcement. Everyone expects a quarter-point cut, but will it cause the same sort of reaction that the ECB saw?
We can easily formulate an argument about why the market is doomed. We have all sorts of issues like slowing growth, valuations, central banks with limited ammunition, negative seasonality and a bull market that is long in the teeth. There are lots of pundits that will be happy to write that argument up, but what we have to watch is the character of the market. There are some warning signs flashing today and earnings tonight are going to tell us if there is something of concern developing. The Fed news next week will likely prevent too much selling but, I'm definitely not rushing to put money to work right now.
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