One of the things that I find especially interesting is the nuance surrounding market commentary. I have long argued that markets are Rorschach tests, and the recent volatility provides yet more examples of that.
In April, a variety of US markets set multi-year highs — the S&P500, the Dow Industrials, the Trannies, and the Nasdaq — all hit fresh peaks (on albeit weak volume).
Since we are long, and are still within a few percent of the recent highs, my bias is to view this as a consolidation. Those people who are in cash may view it as the beginning of a pullback that (hopefully) affords them a better entry point. Those short may see it as a beginning of the inevitable crash. Hence, my phrase “Rorschach Markets.”
You can see similar bias in the economic data. We heard a few weeks ago from some folks that rising commodity prices were sure to bring about the next recession as they crimp consumer spending and lead to inflation. Now that energy and metal prices are falling, we are being told its proof of a slow down never mind the deflation or boost to consumers wallets.
I bring these up not to say one side or the other is right or wrong, but to point point out the biases inherent in the process of looking at and assessing data.
So lie down on the couch, have a look at these photos, and tell me: What do you see?
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