To be sure, the naysayers (such as myself) have been vilified, and any further top talk has now become almost indistinguishable from "The Boy Who Cried Wolf," as the averages have powered higher and have resisted crisis after crisis. This morning's opening observations do not guarantee a top -- indeed, the recent internal divergences could be remedied and reversed. The technicals could improve, as they have at numerous stages of the current rally. They do, however, point to current conditions that in the past have indicated a top.
Mr. Market's recent move higher has been unbalanced (measured by breadth and sector outperformance/underperformance), as it has been led by nearly parabolic moves in consumer staples and health care stocks, while the optimistic forecasts of accelerating and self-sustaining economic growth are not being validated by the lagging smaller-caps, industrials, technology and other economically sensitive sectors. Citigroup's surprise indices for the U.S., Europe and the emerging market economies are all weakening -- in the EU and in emerging markets, the surprise indices have actually turned negative. A slowing in global GDP after a strong first quarter (importantly buoyed by inventory replenishment after a fourth-quarter 2012 inventory contraction) will likely define worldwide economic growth over the balance of the year. To the extent that the outsized first-quarter 2013 stock market gains were a product of better-than-expected growth, the next few months of market returns could be adversely impacted by less-than-expected growth in the real economy and in corporate profits. As well, a stronger U.S. dollar coupled with slowing global growth should pose a challenge to optimistic consensus earnings expectations for 2013. Other meaningful non-confirming technical divergences (discussed earlier) are increasingly conspicuous. My personal experience is that when I have found myself as frustrated as I am these days, the best thing to do is to take a few deep breaths, reassess one's analysis/conclusions and if proven to still be in place, ignore the cheerleading and uninterrupted price rise. Every subscriber must develop his/her own view of the market's risk/reward as well as that of individual stocks, with time frames and risk tolerance being the most important ingredients to that decision.