Agree with you mate and plenty more negative catalysts bubbling away in the background, any one of which could cause a major correction on its own. Although, if these catalysts were triggered together then we'd see absolute carnage.
Covid lockdowns, inflationary pressure, cyber-security issues, supply chain issues, anti-trust probe, immigration slow down, housing affordibility (also don't forget the housing moratorium ends in less than 2wks in US), political issues, meme stocks, crypto bubble, crypto memes, not to mention some of the highest valuations on assets and equities we'll see in our lifetime...
The fact that monetary policy is still accommodative means the market could shrug almost all of these off and stay propped until material changes happen there.
So I'm certainly not game enough to call the top but I do think we will see a pullback to 4170-4200 in the near term and then the bounce is dependant on the impact and severity of any of the above listed issues.
However there are a couple of things investors should be aware of going into this cautious time in the market.
As discussed, there are a number of negative catalysts that may trigger a sell off. In the last year or so we've seen record amounts of cash pumped into the economy and the markets. The thing the stands out the most when you look a little further into that is the amount of margin debt that comes with that. Yes, record amounts of cash has been pumped into the markets but that cash has been amplified with margin instruments; all at a time when record amounts of new (uneducated) investors are using leverage. This has seen margin debt climb to eye-watering levels - which is usually a precursor to major sell-offs.
Remember that margin positions will be automatically cut at set levels, so a decent sell-off (a distant memory for most) will trigger a flood of selling yet to been seen in markets IMO. And thats just the automated sell orders. What about the lemmings that will panic sell off the back of that?!?
I'd actually like to see the margin positions on Apple and Microsoft alone. Just this morning I was reading an email from Market Index saying that those two companies alone have accounted for over 1/4 of the S & P 500's gains in the last 3mths. Considering Apples MC is bigger than the whole of the ASX combined it wasn't really surprising to me but it does show that a lot hinges on very few companies. Anyone thats ever been well overweight on one or two stocks in their portfolio should understand what that means - theres some bloody great days and then theres some days that are jus outright bloody...
Add Amazon, Google and FB to that and you'd have to say a lot of the markets move hangs on big tech. The current tax reforms and anti-trust probes could have severe implications... Also, good to note that collateral and margin are being used in the property and crypto-currency world also so this may have a domino effect if one market starts to drop rapidly...
The other thing that I'll be keeping a close eye on, as its potentially a 'black swan event' (sounds so cheesy, I know), is the current probe the US is doing to explore if covid was a lab-made virus. Recent rhetoric is the US has changed substantially on this and the current probe is being pushed to be concluded within the next couple of months. Obviously there's a very low chance of this being proven BUT if it was to be proven I'd say this would trigger a major crash and major restructure of the world as we know it.
China is known as the 'Worlds Factory' so if this was proven then you'd see potentially the entire world turn their back on them and chaos would ensue as import/export/supply/manufacture industries would be scrambling to keep themselves afloat and negate the damages.
As I said, thats VERY long odds that anyone proves that or if any of it actually happens. And although it may seem as though I'm a conspiracy theorist, I'm far from it, so don't think I'm one of those guys that sits at home in a tin foil hat dreaming apocalypses. But I am heavily invested in the markets so I think it's important to be aware of anything that has potential to materially effect those investments. This does...
Anyway, obviously this Sydney lockdown has given me way too much time to go on such a rant so I'll summarise.
IMO near term pullback for the XJO 4170-4200. The seemingly unstoppable printing presses may help see a bounce from there Upside potential from current levels on XJO is barely anymore than 3% IMO Take your pick from the above to judge downside risk...
Just remember
THE TREND IS YOUR FRIEND (UNTIL THE BEND AT THE END)
(20min delay)