The clear and present dangers of Europe and the fiscal cliff are gone for now, hibernating, but not an imminent threat. Based on this, the tape goes higher everyday. I was sitting around thinking of past markets that were similar to this. There was a lot of complacency, much optimism, everyone was bullish and there was nary a care in the world. It's usually at times like this that the market will come and temporarily break your heart. It always seems to take away the punch bowl when the majority is leaning one way. I am very bullish, but my last few posts have been of "bullish paranoia" about stocks. It's good to be paranoid in the stock market.
If you remember back in early May, it was all systems go and the market looked like it was ready to take out the April highs. It came about seven handles shy. We had a soft jobs number and the DOW traded down 168 points and ended the week lower. That preceded about a 120 point move lower in the S&P. We then bottomed on June 4.
October 19 was another doozy. Again, the market was minding its own business and working higher. At this point in time, it was trying to take out September highs. $GOOG reported a disaster and the markets dropped two percent that day. Earnings were coming in very soft. This precipitated about a 110 point decline in the $SPX. We then put in the November 17 bottom and it's been onward and upward from there.
Is it different this time? Usually not. The market is the market and it does what it does. If there is one place that history seems to repeat again and again, it's the stock market. It's always good to be prepared for that cheap shot left hook that you don't expect, or that mini black swan that may be disguised as a duck. They happen.
Will it be this week? There is enough economic data coming out (maybe one data point goes bad) to screw the pooch if it wants to. It might not even be that bad, but the market will look for that reason to let some air out. The market wants to go higher and it will go higher, but it will find a reason, as it always does, to pull back.
We may want to tag the $SPX 1520-1525 area first.