The Bloomberg quote of the day form this AM read:
“I’ve failed over and over again in my life and that is why I succeed”
While not at all comparing ourselves to MJ, his six titles and his decade-plus of unparalleled dominance in the modern era of basketball, we do share a similar experience in that our failures also tend to sow the seeds for eventual success(es).
Long-term clients of our Macro research product know that we haven’t traditionally been the bulls’ huckleberry at the top-end of market melt-ups in previous years as various Polices to Inflate have appropriately led us to discounting eventual slowdowns in economic and/or earnings growth. This time, however, we too are cheering on those gains with the backdrop of not much incremental in the way of such policies.
As we outlined in our note from Friday titled, “1565?: SP500 Levels, Refreshed”, we think the balance of risks underpinning the US equity market from both a fundamental research and quantitative risk management perspective remains demonstrably in favor of further upside.
More importantly, we think there are a number of investors who may not have fully participated in the melt-up; they and “the flows” will likely be buying the dips at/around our immediate-term TRADE and, if necessary, our intermediate-term TREND lines of support:
- Immediate-term TRADE Overbought = 1509
- Immediate-term TRADE support = 1486
- Intermediate-term TREND support = 1434
If you’re still bearish on this market or do not necessarily believe it has further upside, that’s totally fine; to each his/her own. We just don’t think it's prudent to short this puppy at least until you see a quantitative breakdown through the aforementioned level(s) of support that is also confirmed by a deterioration in the fundamental backdrop.
Right now, however, that scenario is about as probable as sustained flows into fixed income funds throughout 2013 (i.e. “not very”).