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Haha look at my chart... I'd buy me on dips! On fundamentals though I may be off a bit. I mean come on, 55% accuracy? That's just barely better than flipping a coin!

Seriously though, I've been expecting a pullback in the Dow and S&P for about a month now. The technicals are just out of whack, but then every time we get a pullback looming some M&A activity comes along and props the market back up. It's pretty interesting. I'm no longer looking for a pullback though, and there are a couple reasons why:

Sentiment: The old Warren Buffet quote about being "fearful when others are greedy, and greedy when others are fearful" thing. Currently, there are a lot of people talking about and expecting a pullback. In fact there are a lot of shorts out there right now too. When there are alot of people talking doom and gloom and stocks are holding up or are actually doing well, that usually spells great returns for the market.

Technicals: China had a 6.5% selloff the otherday and the Dow & S&P actually posted big gains. That's huge considering what the last Chinese selloff did to us back in late Feb and early March. Again today there was a 9% or so selloff in China, and as of 12:30 we're only down 11 points on the Dow and the S&P is actually up 0.65. That's huge too, as if these markets were topping there should be a monster pullback.

Economics: Supply and Demand. $11.5 Billion in M&A deals, and monster buyback programs has created a big constriction in supply. I'm not going to harp on the supply side, as you hear it in the news alot. Demand is actually increasing. The "Global Economy" is creating new wealth everywhere, and smart people are putting their money to work for them. Where do they put it? Certainly not in bonds (and that's why those yields are creeping upwards) with their yields so darned low. Certainly not in residential real estate with prices still dropping. Possibly commercial real estate with low interest rates and stable cash flows in the form of rents, but real estate is pretty risky and currently the cap rates are way too low to support decent returns. Commodities are pretty obtuse for your average investor, so they're putting it into the vehicles they've always turned to, the market. I didn't mention mutual funds since when they get invested in, they have to put that money to work, and really they have the same choices when you get right down to it.

Fundamentals: P/E, I know you've heard about it on the news everywhere. P/E's are still low relative to the last time we were anywhere near these levels. Earnings are up, interest rates are still low, and that right there is the bottom line. As long as those two stay where they are, the markets will go higher. Personally, I don't think they will remain where they are for very long though.

Those are the reasons why I'm no longer looking for a pullback: Sentiment, Technicals, Economics, and Fundamentals.

Then again, I'm only just barely more accurate than flipping a coin.

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