The major North American stock indices hit ATHs this week...initially shrugging off virus concerns...but when the virus headlines became increasingly scary ahead of the weekend stocks and commodities fell while bonds, bullion, the US Dollar and the Japanese Yen rallied.

The major stock indices continued their relentless rally this week...and I got myself into a frustrating trader’s dilemma. It’s funny now...and I’m sure any traders reading this will be thinking, “Yep...been there...done that,” but it sure wasn’t funny while it was happening!

Dramatic market price action on Tuesday evening Jan 7/2020 created important Pivot points across a number of key markets...especially gold. Look at it this way...gold rallied ~$125 in 9 days leading up to and including Jan 7...it rallied ~$40 in the last 1 ½ hours to hit a 6 ½ year high at $1,613 (basis Feb Comex)...and then tumbled ~$70 in just over 24 hours.

Can we “trust” price action during low-volume holiday markets? That’s a tricky question...my best answer is that low-volume holiday markets are usually less “valuable” than regular markets in terms of “validating” price action.

The most important message from the financial markets in 2019 was, “Don’t Fight The Fed.” The 180 degree turn in Federal Reserve policy...the Powell Pivot...caused markets to realized that it was, once again, “All About The Central Banks.”

The benchmark North American stock indices keep printing new ATH...while complacency reigns even as the CNN Fear & Greed index is flashing extreme greed. Volatility is ultra-low across all markets, the put/call ratio is at a 5 year low and credit spreads are tight. People are reaching for yield and have no interest in buying downside protection.

We saw very choppy short term price action this week in stocks, bonds, currencies, gold, and crude oil as markets were rocked by trade deal headlines, the UK vote, the impeachment process, the Fed and ECB meetings...not to mention the endless barrage of Trump tweets!

Stocks, bonds, currencies, crude oil and metals were all rocked this week as sentiment swung dramatically from “risk off” to “risk on.”

The S+P 500 index hit new ATHs again this week...closing higher 7 of the last 8 weeks...rising ~10% from the early October lows. YTD gains are ~25%. David Rosenberg reports that 95% of the total return YTD has come from P/E multiple expansion, with dividends accounting for 8% while actual earnings account for a negative 3%.

The major American stock indices hit new ATHs Tuesday but turned modestly lower as trade optimism faltered. Bullish momentum has been inspired by easy monetary policy, FOMO and TINA...with little regard for WHY monetary policy has been easy. Investors have been handsomely rewarded for buying dips.