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The Bull Market Doesn't Care That You Think it "Should" Correct


Unless Santa Claus comes to town in an atypically bearish mood, 2013 is going to end the way it began: with a bunch professional money managers calling for a 10% correction. As early as last January mainstream media started complaining about the overdue nature of a market pullback.

Even as overall market complacency has moved higher the hand-wringing among professional investors grows.  Goldman Sach’s (GS) David Kostin nicely captured the prevailing mood last week when he made a bullish call for 2014 but only with a the caveat of a very specific-sounding 67% chance the S&P 500 (^GSPC) will sell off 10% or more in 2014.

In the attached clip Mark Luschini of Janney all but defies those who would offer a divergent view given the facts at hand.  “We’ve gone more than two years without so much as a 10% correction which is a fairly rare phenomenon,” Luschini argues. Stocks are up 30% year-to-date with barely a hiccup along the way.

The market moving higher isn’t a sell thesis. If it were stocks would have at least corrected at some point in the last two and a half years.  Those who have been stubbornly waiting for a pullback have missed a 165% rally from the March 2009 lows. It’s a high price to pay for being patient. 

It’s been about 550 trading days since August of 2011 when stocks finished their last pullback. That’s an usually long stretch by historical measures less than half as long as bull runs from 1990 - 1997 and 2003 - 2007.

Of course the 2007 run ended in catastrophe, but 1997 was a fairly run of the mill crisis in the run-up to the great NASDAQ bubble top of 5,048 made on March 10th 2000. For whatever it may be worth that once unassailable peak is about 25% higher from current levels.