I’ve been absent for a couple of months but little has changed to alter my opinion of the stock market. We appear to be entering the bubble phase in the market with the S&P 500 solidly breaking through the 2600 level. The fundamental story appears to be the imminent passage of the new tax reform package. This trickle-down reform has failed in the past and surely will do so in the future. However, the wall of worry in the markets appears to be breaking. Corrections have been much more shallow as unsophisticated investors are buying into this story.

I would suggest that we might get a correction as we approach the upper end of the trend channel. You can see this by looking at the chart below. We will then be in a position to test the crucial 2600 level in the S&P 500.

If we can hold above that breakout move the next target would be 2900-3100 on the S&P 500 .

Over the next week I will be discussing the “Anatomy of a Bubble.” This is the time when the “wall of worry” disappears and when the unsophisticated investor pushes prices much higher by entering the market.

For those of you who have been a major participant over the last 8 years, it is a time to be very alert and ready to pull the trigger on your investments. Does reality really support the story being built? Is the new tax reform package really capable of improving our economy and helping the middle class? If the feds historic quantitative easing did little to fuel the economy, we are talking trillions of dollars in stimulus, can we really believe in this tax reform?

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