S&P 500: What Could Go Wrong?

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Gillie

NEW YORK ( ETF Digest) -- The S&P 500 chalked up 11 weeks in a row without printing a down week. The only time that has even come close to happening over the past 20 years was January to April 1998 at the launch of the dot-com bubble. But that was only 10 weeks.

The market has gotten every miracle it asked for. Even on exceedingly low volume, miraculous money has appeared just when the market starts to dive. Headlines of miraculous bailouts in Europe hit the media with precision accuracy.

With the S&P showing its first down week (a frightening -0.50%), Ben Bernanke just happens to make a speech before the market opens with every wink and nudge of another round of QE (i.e., "free money"). This week, central bankers are meeting in Paris which always produces a Willy Wonka adventure for the market.

What could possibly go wrong?

Greek bond default? $4 per gallon gasoline? 8.3% unemployment? Iran-Israel tension? Portugal and Spain bond defaults? No problem.

For the gamblers reading this, what are the odds of rolling a seven after you've thrown a seven 11 times in a row? Right! Exactly the same odds every time. In fact, one might even begin to believe the dice are loaded. Or even a miracle!

Let's take a look at our miracle on the S&P 500 Weekly chart ( SPY).

I've only included one indicator at the top of this chart -- the Money Flow Index -- which I deem to be one of the best indicators for supply and demand. If we look back to the euphoria of QE2 during 2010 of $5 billion per day of "free money," we see that the MFI only went into the extreme overbought realm above 80 for three weeks.

We are currently in our sixth week of being overbought on the MFI. Incidentally, the only other time the MFI was overbought for six consecutive weeks was in October 2006. But that only reached a level of 85, not the current feverish pitch of 91. I suspect I don't need to tell you how that miracle turned out.

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