04/19/2017 - David Rosenberg: Is Mr. Market Playing The Role Of Pavlov’s Dog?
“What you see isn’t always what you get, and it is likely a mistake to extrapolate today’s market performance into the future .. Admittedly, the charts, momentum, and fund flows are all very positive (US equity exchange-traded funds took in a huge $22 billion of net inflows last month) .. But some aspects of the technical picture have become muddled—the share of NYSE stocks trading above their 200-day moving average is at the highest level in nearly four years (a sign of overextension) .. As previously discussed in Outside the Box, sentiment is wildly bullish, and while it has been such for weeks now, we have hit some pretty extreme levels .. As per Bob Farrell’s Rule #9, in reference to the herd mentality: When all the experts and forecasts agree—something else is going to happen .. Just because it hasn’t happened yet, doesn’t mean it is not going to .. And of course, that then leads to Rule #4, which also has to do with excessive manic behavior .. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways .. They do not correct by going sideways! .. And lurking in the background is the Federal Reserve, which is poised to raise rates sooner rather than later .. Monetary policy is profoundly more important to the markets and the economy than is the case with fiscal policy, though all the Fed is doing now is removing accommodation .. The time to get interested is when no one else is. You can’t buy what is popular and do well .. Long ago, Ben Graham taught me that “price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down .. Be fearful when others are greedy, and be greedy only when others are fearful.”
