As I wrote below, the bear case going forward is based on negative fundamentals - subprime housing problems and slower economic growth. In contrast, the the bull case is almost purely technical, essentially arguing the market isn't cheap but not overly expensive right now. Up until now, bullish traders have also had strong technical reasons to stay glued to their charts irrespective of fundamental news. Now those charts are showing bearishness and possible technical reversals. I think it's going to be hard for them to maintain their bullishness going forward. In addition, I think they will pay more attention to bearish news going forward.
Food for thought.
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28 minutes ago
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Note that if the fundamentals go further south, the stocks will be more expensive at the same price ...
... so that a scenario where a new growth driver does not show up by summer is likely to confirm the bearish view, while if a new growth driver does show up soon, there are opportunities for the market to continue growing.
One growth driver, of course, would be a strong downward correction of the dollar to a new trading range ... the US is fortunate in that many import contracts are prices in dollars, so the J curve effect could be fairly weak, and removing any substantial portion of the existing massive trade deficit would act as a substantial economic boost.
The danger, there, would of course be Fed action to "protect" the dollar from imported inflation (as opposed to protecting the jobs of workers producing products priced in dollars) ... as is often the case with a central bank with a "fight inflation first" attitude, an unecessarily low inflation target range is the enemy of the economy trading its way out of trouble.
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