What has to happen for even me to believe that the market is topping?
I have a laundry list:
1) Retail buyers enter the stock market on a large scale. So far they are missing in action.
2) S&P 500 profits historically peak at 50% above the old high. In the last cycle they got to $100 a share. So we still have room to soar to $150/share, some 20% above today?s probable $120/share.
3) The yield curve is always inverted at a market top (short term interest rates are higher than long term ones.) Now, the reverse is true.
4) Stocks are always more expensive than bonds on a relative basis at bubble tops. Currently, stocks are two standard deviations cheaper than bonds, largely through the grotesque over valuation of bonds.
5) Even if the Fed does raise interest rates tomorrow, historically markets were higher in nine out of the last ten first hikes.
How soon will our sideways correction end? Possibly as soon as Thursday afternoon at 2:00 PM, when Yellen shows her dovish hand (wing?).
