This could be a major top in the US Stock Market. It could be a historic top like 2007 or 1929, maybe even 1987. This is certainly a possible outcome.

Something else to consider is that betting on these outcomes is rarely a profitable endeavor. They make movies about the heroes who bet heavily on the financial collapse of 2008 and made fortunes. We talk about these fund managers like legends. What they don’t make movies about are the infinite number of investors over the years who have bet on such outcomes, and were wrong instead. I guess Hollywood doesn’t think those stories will sell.

I understand the bearish thesis for US Stocks. In fact, we always take the other side of our opinions and try to poke wholes in a given theme. We’ve been in the camp that since most stocks have gone down to sideways over the past 19 months, this is a classic cyclical bear market. It has gone on through both price and time, not just one of the two. I don’t care how you slice it, this was a bear market, and possibly still is.

Now, whenever in doubt, zoom out right? I think we can agree that the rallies of 2016 and 2017 deserved a rest. So the question is whether this “rest”, or digestion of gains, if you will, is a distributive top that will lead to a much more substantial decline? Or is this a consolidation within an ongoing uptrend that we can argue began in early 2016 and, even longer-term, the 2009 lows.

Yes recession, and yield curves and the fed and trump and all that. Yes I know. We’re going to focus on price, however, to figure out what’s going on. [Read more…]