Very interesting price action today in the SPY, which is the SP 500 ETF. It opened strongly, rallied to make a new all-time high at 198.56, eclipsing the old intra-day high of 198.29 set on July 3rd. However, a late day sell-off pushed SPY to close at 198.20, with the SPY trading lower after hours. The chart below shows the recent price action. 196 is the first level of support if the SP 500 does pullback.
Interesting to note that although the SP 500 made a new all-time high, VIX still held above the 12 level, which has been critical support, as seen in the chart below. So VIX not believing this latest rally all that much.
Valuation metrics are obviously stretched as well, with P/S ratio at historic extreme. .
Current S&P 500 Price to Sales Ratio: 1.78 +0.01 (0.50%)
S&P 500 Price to Sales Ratio (P/S or Price to Revenue).
Current price to sales ratio is estimated based on current market price and 12 month sales ending December 2013 — the latest reported by S&P.
Won't get into the P/E ratio argument, which are obviously muddied by extreme levels of corporate stock buybacks, as shown below.
Let us not forget that smidge of turmoil in Ukraine, Iraq, Syria and Gaza, and the recent debt issues rearing their head in Portugal, Puerto Rico and Argentina.
Also, US macro data has fallen off a cliff this year, while stocks yawn and follow the Fed balance sheet higher, as seen below.
With the SP 500 now less than 1% away from many analysts year end price target of 2000, it may be time to hand the ball off for someone else to carry it the last few yards, especially given that the Fed is actually tapering, and also trying to jawbone the market lower.
I know that so far none of the valuation, macro, and debt concerns have mattered with the Fed watching the markets back. The unquestioned belief in the power of free money has yet to be dented, given the lack of any significant pullbacks in stocks over the past few years. But as we discovered in every previous crisis, it doesn't matter until it matters. And no one ever saw it coming.
To quote the great Jackson Browne, Don't think it won't happen just because it hasn't happened yet