2013 has been a banner year for stocks. We’ve reached new highs, and most Wall Street analysts think
the good times will continue to rollin 2014 and 2015.
“This is really the mother of all liquidity rallies,” Gluskin Sheff’s David Rosenberg wrote to his subscribers today.
Rosenberg points to a number of market warnings signs that often portend a stock market correction.
Unfortunately, everyone is pointing to these same signs.
Here’s Rosenberg’s explanation:
Despite the hurdles from valuation, sentiment and even technicals, one of the problems for the bears is that everyone seems to acknowledge that we are due for a correction. Even the bulls are anticipating one — hoping for one, in fact, in the name of a pause that refreshes (keep that powder dry). But it may well be this near universal perception of a correction that means we may not see one… at least one of a 10% variety which we have not seen now for 530 trading days. But the reality is that such a string isn’t altogether that rare — we didn’t even have one 10% setback in that entire 2003-2007 bull run to the highs at the time. And from October 1990 to October 1997 (1,767 sessions), there was not one 10% correction. Now historically, they do tend to occur every 30 months in the context of a bull market, but while we may be long overdue for one, the main theme here is that it is not unprecedented go this long without one.
Often in the markets, if everyone expects one thing, the opposite is more likely to happen.
“The S&P 500 is now just about 9% above its 200-day moving average,” Rosenberg writes. “In other words, it could correct all the way to 1,630 and the long-term trend-lines wouldn’t be violated.”
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