By David Levine From the bottom of the most recent market downturn in mid-October until the start of December, the market has risen quite a bit in a short period of time. Due to this rapid rise, I have begun selling positions in large-cap technology stocks. This market is looking a little too bullish, too much like a party, for my tastes, even though I would not be surprised to see the rally to continue well into 2015, and even possibly into 2016.
In my opinion, it's possible there will be new all-time highs in the Nasdaq and the Dow Jones Industrial might just crack the 20,000 mark before this bull market ends. The signs of excessive bullishness are evident, and it is not so much the excessive bullishness that bothers me but the lack of fear and or caution that is accompanying this latest advance. If we look at the prices of precious metals, oil and the VIX, it would be fair to say that these three measures, when taken together are a fair indicator of a complete lack of fear. They are all carving out multi-year lows. The VIX is a well known fear gauge, and it tends to drop as the market rises – signaling increased bullishness and complacency. Gold, in my eyes is a bit different. It's a gauge of anxiety and a bet against printed money. While I am not a gold bug, and there is something to be said for the argument that gold is just another fiat currency, I think that historically, gold will always have its place, if only because investors flock to it when they are nervous.
The price of oil, while not as strong of an indicator as the other two, seems to be signalling in my opinion that there is absolutely no fear of inflation.