Here are the very bullish factors supporting stock prices:
1. We have likely seen a massive wipe out of margin long positions.
2. We have blown up psychology with massive bearish psychology at hand. (This is very bullish )
3. We have a weakening dollar (this is bullish )
4. We have very low interest rates (this is bullish )
5. We have very low input costs (oil and labor, this is bullish )
6. We have a massive melt-down in biotech happening (this is bullish )
7. We have a 25% corrections in place in the Nikkei and the DAX-0.73% (this is bullish )
8. Massive bearish sentiment by major brokerage firms for 2016. (Last year they were all bullish looking for an up-year of 10% on average and they were all wrong)
9. Terrible technical conditions (breadth, divergences, etc) - These work in contrary ways. Everyone sees them as negative. They are negative when people are selling to raise cash (which is bullish ).
10. Very high corporate profit margins (very bullish ).
11. Plenty of corporate cash on hand for mergers and acquisitions ( bullish )
So the foundation of the market is very constructive from many perspectives.
The negatives are:
1. Rapidly rising default risk around the world as ZIRP and NIRP takes hold.
2. Falling PMI's signal softening economic activity
3. Corporate Buybacks can't continue forever, especially with rising default risk
4. Rising rates to corporate borrowers (Rising yields on HYG0.12% , falling HYG0.12% prices)
5. China: Weakening outlook. Draw downs in reserves to support an overvalued currency. $99 billion drop announced today to the lowest levels since 2012.
6. Jobs numbers in the US have massive seasonal adjustments which are hiding the worst numbers we have had in many years.
7. Demographic challenges means that US Growth will stay low (and steady) for two more decades. Read Harry Dent's books.
8. China's demographics are where Japan's were in the late 1980's and very bearish long term.
Those are the main points that I have in my head at the moment that will see-saw prices back and forth across the range for the remainder of the year.
The reason for the strong finish to the year? The election will be out of the way. The election is having profound impact on psychology and the year-end will be a strong quarter.
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