Can a bear still occur? Of course it can. If we wake up one morning and the world has to deal with a major bank default due to bad loans or too much exposure to oil if it keeps falling, then we all have a problem to deal with. The market would get crushed, simply because it's an overvalued pig that's rocketing up on Fed juice, and the promise by the Fed to keep the juicing going as long as needed to keep the world soothed from any pain. After all, we can't have free markets now can we! We'll have none of that, so we're all forced to play a bloated pig in the hope that it finds a way to stay grossly overvalued.
Shouldn't be much of a problem, as long as the Fed governors around the world work together to keep the bulls happy and the bears frightened. This week we saw this all take place in front of our very eyes and ears. The sounds and sights of Mr. Draghi of the Eurozone Central Bank as he promised, and promised, and then promised some more. I do solemnly swear, and so on. The market wasn't sure what to do with such great news. So it blasted up and then crashed out twice as hard as it went up.
What's this? Downside on Fed promises? No! So the market rallied back and finished flat overall. No worries. Today, Friday, we exploded yet again. Ah yes, that feels better. Germany fell 500, yes, that's 500 points yesterday from 10,000 to 9,500. It seemed for once the juice was poor-grade quality. Again, no worries. Germany exploded back up. Someone had to wake them up from hallucinating. They got their act together, and we, thus, followed along. We aren't too far from making our way back up to the old highs.
On top of that the S&P 500 is now only down 1% for the year, with the lagging Nasdaq still down 5% for the year 2016. It'll play catch up over time, but higher beta and higher P/E's are not on the main-course menu right now. Biotech is not playing nicely, being the biggest culprit. So another week is in the books and all is well with the world. Stimulus is everywhere. Low rates are everywhere, and, therefore, the bulls are dreaming big dreams, while the nightmare of being a bear continues ever forward. I actually feel sorry for them. Ok, I don't, but it's not fair. It is what it is.
So what's the key here? Simple. We closed 2015 at 2044. We gapped down hard on the first trading day of the new year. The open gap at 2044 is huge, not only in importance, but in size. A massive gap, thus, if the bulls can ever plow their way through 2044, the bears are in huge trouble. Won't be easy, but hey, the bulls make things look easy even when they shouldn't be able to do so. Maybe it takes time as they play Pac Man and slowly eat their way through the gap over time, unless, of course, they find a way to gap through the whole darn thing, which I guess wouldn't be all that miraculous. If they need some help they can just call on our Fed Chair Yellen for some immediate gratification. Maybe she can bring rates back to zero, and then we can be up 40 S&P 500 points at the open. Above 2044 we can look at getting back to 2134 or the old highs. It won't be that tough, but if we do get there the market will run in to the biggest negative monthly-chart divergences likely ever seen. That will make the sledding tough for a while, but I'm sure the bulls can work it off over time with a few months of lateral action. It appears, in the end, when we look at things, that if the Fed is being kind then the market will be just fine. This could all eventually lead to a massive breakout and much higher prices, but one day at a time. Even the Fed will have a few days of trouble getting through 2134 and not getting smacked down.
Bottom line folks. The Fed governors around the world are running the stock market. There is no free market. May never be again. Adapt to it and we'll be fine. It's incredibly disappointing and upsetting, but we have to accept the new world and the way the market is played these days. I'll do my best to adjust and get you plays when things unwind a bit.