Feeling Bullish

feels so bullish these days. in fact, every time I start wanting to buy the market like this it usually means we're at a top. problem is, the markets have been climing the wall of worry for some time. fear is still rampant and doom and gloom abounds, not typically the stuff that crashes are made of. on the other hand, with over 250 new highs in Toronto yesterday and the straight up climb in the TSXV index (and even IBM shares) it makes me think we're due for a correction. quantitative easing (QE) is throwing things off. I predict we hit 16,000 on the TSX within 12-18 months, although we could see a major reversal before we get there. everyone is so bullish on copper these days it makes me think the opposite will happen. at least in the short term. longer term it's hard not to be bullish but when everyone plays the same side of the trade we all know how that turns out. inflation is not running rampant either, at least that's what the TIPs are telling us. people say that guys are selling the long end of the yield curve to buy mid range treasuries and I agree with that (judging by the recent twist in the yield curve). zinc is looking good ~2 years out. on one hand I feel like selling but all the stocks I'm playing look technically poised for a breakout, like the golds. we broke higher on the HUI and GDX, only to consolidate and now move higher? the cash flow generation potential of the producing gold co's is excellent. even oil is looking stronger. what will sink this market? one this is certain, we don't know what we don't know. something will come out of left field that will tank the market. it's even shrugging off the election results (US), bad housing numbers, you name it. one scenario no one is pricing in right now is a return to and breakthrough to the pre-2008 levels. and yet, there appears to be little resistance to get there. if that happens all bets are off. another negative is the market is having trouble digesting equity issues, and the equity issue market is good but not great (again, not the stuff that market tops are made of).

Update: Nov 8/10
347 new highs in Toronto today, that's the most I've ever seen since I started tracking this in '04. In fairness, the y/y comparisons are skewed because '09 was such a garbage year. But having said that, typically a major reversal follows such a universally bullish sentiment. Flash crashes abound as well, another negative sign (a la Spring 2010, and we know how that turned out). Net net, while I think we're closer to the top than the bottom, I think this market still has room to run on the upside.


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