You can't argue with a good chart.
All of our indices are ripping up to new highs and don't let the lack of volume bother you – as it doesn't seem to bother anyone else in the media these days. Volume in the first half of Q1, so far, has been about half the rate we had in Q1 of last year and Q4 was no better so maybe this is just the new normal – a rally with nobody actually trading.
Just because no one is buying – it doesn't mean you can't mark up the prices, does it? The only time there is price pressure to the downside is when there is a lot of selling and, so far, no one is selling either – they're just not buying or selling – it's a dead market.
Corporations are, in fact, the largest purchasers of stock – accounting for 200{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} (not a misprint) of the net inflows into equities. Without companies buying back their own stock at record paces, this market would be dropping like a rock attached to an even bigger rock:
Despit buying back incredible amounts of their own stocks, actual Corporate Earnings have dropped 10{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} since Q3 from a high of $29.84 on the S&P down to less than $27 per share so far for Q4s reports. 4 x $27 divided by 2,100 = 20.20 – that would be an insanely high p/e for the S&P, where 15 is more common ground. Having a major index that is possibly 33{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6} overvalued is, as they say in Stockholm - not good.
Of course, it's no surprise that earnings are turning down because data is turning down as well, per the Economic Surprise Index we discussed on Thursday as well as the actual US Macro Index, which also SUCKS! This is really not the sort of thing you should be sticking your head in the sand over. If you were driving a car, you would step on the brakes or at least swerve to avoid an obstacle that's clearly in your path – why would you not…
