Consolidation or Exhaustion?

This is a big question going around some of my circles these days. I’ve heard valid arguments from both sides. The bulls are convinced that any dip, or even pause, is an opportunity to just buy US Stocks. And the bears are convinced (and have been) that the rally can’t keep going like this without correcting first. The last few weeks of trading have caused both of these camps to question their conviction. At least that’s how it appears from where I’m sitting.

As you guys know, I try not to be a bull or a bear, but just take what the market gives us and look for good risk/reward opportunities that way. Most of the time, my positions have nothing to do with the direction of the S&P500. But it’s important to have an idea of which way we’re headed, especially if the resolution out of this might be to the downside. You see, during violent sell-offs, it doesn’t matter how “good” your stock is, or how much cash it has on the books, or how many times momentum has confirmed new highs. When assets are being liquidated and your stock, or commodity becomes a “source of funds”, they will sell your stock harder than you could ever imagine. This happens much less often on the way up.

So? Is this a consolidation in the S&P500 before a new leg higher? Or was that it? Was that the bull market?  (more)

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