Here we go again. The robo machines have been raging for the past two days, and by mid-afternoon we were hovering around 2045 on the S&P 500. Since that’s only 2.3% below the all-time high reached at the end of December, bubblevision’s amen chorus was back out in force, pronouncing that all is well, the momentary headwinds are fading and, yes, the bottom’s in.
Not exactly. The robo machines are actually drunk. The S&P 500 first shot through 2045 back on about November 13th, and was then on its way to 2070 by early December. It then reversed course and plunged through 2045 from above on December 10, reaching a low of 1989 a few days later. Shortly thereafter the market erupted back over 2045 on December 18th – -as it soared along an upward path to its year-end and all-time peak of 2090.
As is evident in the chart below, the zigzagging has only gotten more intense and frequent since the turn of the year. By January 2, the S&P 500 plunged back below the 2045 mark, but five days later was back above it; then it was down again on January 9, back up on January 21, and back down on January 26. So here we are on February 3 back above 2045 – – virtually the same spot as early November.
The market is cycling, but the economic facts on the ground are not. Everywhere the trends are getting worse, and not by trivial or debatable increments. Were the stock market an actual discounting device engaged in price discovery, it would be heading south – not in circles.
This post was published at David Stockmans Contra Corner by David Stockman ‘ February 3, 2015.
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