I vividly remember 1983. Michael Jackson introduced the world to the Moonwalk and later released Thriller. Return of the Jedi was the highest grossing film, and Tom Brokaw was named the lead anchor for Nightly News.
Fast forward twenty-six years; Jacko is dead; the Star Wars franchise resembles a cartoon, and Brian Williams now sits atop the ratings world as the anchor of Nightly. But one thing remains the same. The S&P remains 20% above its 200-day moving average.
In fact, according to Gary Kaminsky, former Neuberger big wig and future cable news star, the market has not been this much above its 200-day moving average since May of 1983. "It's just another indication that the fear to "not own" stocks is sometimes as great as the fear to own names for many portfolio managers, especially this time of year," said Kaminsky. "The market is way overbought short-term."
Another reason for the unfettered rally may have to do with the fact that prices for puts, at least expressed in terms of the VIX, are at their lowest level in over a year, making protection more affordable than it's been in a while.
"Everyone feels better about taking some risk being long equities if put options are signaling that there's no reason to be afraid," said Scott Nations, Options Action star and president of NationShares.
Interesting to note is that after May of 1983, the market traded sideways for the rest of the years. So the exuberance that we're seeing may not be unfounded.
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