Cash as a percentage of equity mutual fund assets fell to 2.5% in December, fully three-tenths of a percentage lower than the 2.8% recorded in November, itself a new record, observes marketing timing expert Alan Newman, editor of Crosscurrents.
As of the end of January, cash stands at 2.6%. The sudden drop in available cash means portfolio managers literally threw in the towel in the quest to compete versus exchange traded funds (ETFs) that have zero cash, tossing reserves in without any thought of consequence.
We may be looking at the same kind of epic reversal possibility as we witnessed at the tech and housing bubble peaks. Would it come as a surprise if stocks now experienced a significant bear market? Not by a wide margin. How can you have a bottom when funds have so little in reserve?
Our net liquidity measure still illustrates significant negative liquidity. Our interpretation of the sum of the two charts is simply this; as many dollars as possible have been thrown at stocks without the benefit of intelligence as a qualifier.
Momentum is everything and nearly eleven years of bull market convinced most players that bear markets simply do not exist anymore.
That’s a very dangerous line of thought but understandable as 40 year old portfolio managers were probably asleep in their statistics class as the tech mania peaked.
For the Dow, a bear market would begin under 23,628. After nearly eleven years of bull market, a new bear market would not at all come as a surprise. We’ve placed key support at Dow 21,712, equivalent to the December 26, 2018 bottom. There is “crash risk” down to Dow 17,063.
Meanwhile, if there was any remaining doubt about bullion remaining in a super bull market, the recent price action should have sufficed to change minds.
With all time high breakouts for bullion priced in Yen, Euros and British Ponds, we have no problem with our long held view that gold’s super bull market is intact.
