I am away from my home office and am posting this on a remote
terminal, so I will keep it brief. Since last autumn, I have cautioned
about the stock market potential from several different perspectives.
Basically, I have argued for over a year that the advance from 3/09
represented not only a cyclical bull market, but a potentially powerful
one if anticipated strong earnings could be delivered smoothly. Even
so, by autumn of 2009, I came to regard the trajectory of the upmove
to be too strong. Not reckless, but unsustainable. This caution was
extended when the 2/10 rally broke out to new cyclical highs after
completion of a classical cyclical upleg. It marked the untimely arrival
of the "johnny-come-lateleys".
The recent sharp sell off has gone along way toward eliminating the
overheated trajectory of the market and has ended the rally from the
late arrivals. It has brought the market to a more logical place and
has eliminated the overbought condition. Chart.
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