Investor sentiment at all time highs, Google trying and failing to buy Groupon for $6 billion, and gold being purchased at the mall; all signs of a forthcoming stock apocalypse, right? So where is it?
We don't think it's coming, at least not for the next six months, and quite possibly not until next year. Yes, there are many signs that stocks are overbought, and gold certainly is. But there are a couple of things propping this rally up.
First, consumer confidence is pretty low at this point, which is a good contrarian indicator for the market. Stocks after all, are a leading indicator, so when consumers start to feel as though it's darkest the market knows that dawn is right around the corner. And rise as a result.
Second, the Fed is determined to print money and pump up the market. They're doing this partly because money needs to be spent to cement the economic recovery, but also because they want the rally to continue. When people see the market rise they feel richer, which is good for politicians.
Third, you're seeing a phenomenon in which people are determined to buy the dip. Right now, whenever there's a slight drawdown in the market investors see it as an opportunity, not a sign of crisis. Volatility is ridiculously low right now because as soon as stocks show the littlest sign of dropping people are rushing in to snap them up at what they think is a discount.
So for now the trend is up, it's your friend, and don't fight it. It'll be time to get nervous when your barber starts giving you stock tips. When the correction does come it will probably look like ten people playing a game of musical chairs with only one chair left. But until our proprietary indicators demonstrate that the panic is about to begin, we are more than comfortable using leveraged ETFs to make money in this market.
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