Long Way to Go

The S&P just won't quit.  It is going to surprise the mean reversion traders here, as this thing will grind them to dust, as they look for that 5% correction.  The problem is, the 5% correction will probably finally happen about 10% higher than here.  There is nothing worse than being an early short in a bull market.  And pretty much anything except for shorting within 2-3% of the top is too early.  Which leaves a LOT of time for being early as a short seller. 

I don't know why this thing is going up. I just know that with high probability, we are nowhere close to the top, in both time and price.  The driving force higher could be a few things:  animal spirits, bubble psychology, and momentum building on itself.  It certaintly isn't improving fundamentals, not with the Fed looking to continue to raise rates.  Those tax cuts aren't going to move the needle unless they get everything that they want, which is unlikely.  And even if they did pass those huge tax cuts, the pain in the bond market from higher deficits and more Treasury supply would temper any stock market gains off the euphoria. 

These are the type of markets that favor those who are expert bubble riders, riding it to the top, and getting out when they sense the volatility rising and signs of a top building.  It is not easy, and its something I definitely will not do, just from the inherent vulnerability of a market that is trading so high with no fundamental backing.  I don't think we crack, but it does feel like being long is the equivalent of selling cheap put options.  And I don't use a put selling strategy. 

The only real comfort I can take from this type of market is that it is building up potential energy for the market to get exciting again when the SPX does finally top out.  I think that happens in spring/summer of 2018.  In the meantime, I will focus more of my energy on other markets which have better opportunities, such as bonds, commodities, or individual stocks.