Stock Markets (Are we in a Bubble?)

In a natural market there will always be a boom and bust. So currently we are indeed in a bubble. Now that does not mean we can not continue to blow the bubble and profit from gains, but we need to be more cautious with what is ahead. Why? Markets are suppose to predict the future of the economy. So the question is not are we going to bust but since we are near all time highs would it be reasonable to say the future of the economy looks brighter than ever?

Market Internals

Since last October the market has been on a bullish run and currently seems very likely to continue. Chart of the Weekly SPY shows that there is still more upside to it since RSI and MACD are still rising. They are not at extreme level as prior to the swift drop near end of 2018.

What is not seen in charts are the so call prediction of a black swan event. Such as that of the coronavirus. The best gauge I can find of how China's markets are doing in respect to the US market is ticker FXI, which encompasses China big blue chip stocks. Clearly we can see coronavirus and or trade negotiations between China and US has taken a toll on the Chinese markets.

A close eye should be on the coronavirus outbreak this coming week. If things truely get worse it maybe time to take off some buys on the US markets. I do not think the US market is immune to the effects of the virus in the long run. Again markets project ahead of the economy and although a lot of companies are posting record profit earnings it is difficult to repeat if the 2nd biggest economy in the world is slowing to a stand still.

Is Coronavirus a Black Swan Event?

We have seen how the trade war between US and China has done to the overall US market. So it is difficult to say if the Coronavirus will have a bad effect on stocks. What is cautious to see is that the rate of deaths and infections all though relatively speaking is not exponentially rising it has and still is rising every day. It has not tapper and we have to keep watching this unfold as it may get better or worse.

Conclusions

I am cautiously optimistic because I know mankind has been in worse situations and survived. I am mostly in bonds and will continue to hold while slightly bullish on stocks until if and when the Coronavirus leads to better or worse results. The boom is still on until its not.