The short term LAMPP is slightly in red territory, but the market keeps rising. What’s up with that?
The LAMPP didn’t change much last week, remaining red for the short term and still green on the long-term indicator. The red signal for the short term is not an exact timing indicator. It does tell us, however, that the market is ripe for a decline. For the time being, liquidity flowing from other sources, such as foreign capital inflows, continue to drive stock price inflation.
That is a common feature of the late stages of a bull run. I call it residual momentum. We have been indoctrinated to buy dips and chase rallies. There’s never a price to be paid for that behavior. So we keep buying until the cash runs out.
That could happen soon. A huge amount of new Treasury debt will hit the market this month. In fact, $40 billion in net new supply was issued on Friday and another $8 billion is being issued on Monday. That has caused some indigestion in the bond market. But stock buyers covered their eyes and sing “Tra-la-la” at the top of their lungs. They don’t want to hear any bad news.