Interesting junctior

Well, here we are now the day before 3rd quarter GDP is released. About a couple months ago I mentioned how I read about some firm that was predicting 3rd quarter GDP to be negative. We're going to see now if they are right. Expectations are for 3rd qtr GDP to be 2%. This is a potential market moving event. The market has been consolidating for about a week which means a breakout or breakdown is imminent. Taking a look at the NASDAQ which has been the market leader, a breakout looks more likely. Yes, I'm aware that today, AAII sentiment is showing the highest level of bullishness since the bull market began but what people are actually doing with their money is quite different and that counts more. AAII sentiment has been showing bulls outnumbering bears by a significant margin for 7 weeks straight now and that hasn't stopped the market going higher fueled by chronic top picking and put buying during what has turned out to be a phenomenal earnings season. At the end of the day it's always about earnings. Look, we're going to get a correction soon but the market is acting like it wants to go higher still and there's still room for money based measures of sentiment to reach "excessive bullishness" like AAII sentiment has.

Long term wise, there's no shortage of deep rooted pessimism for this market. Aside from your average trader who has a permabear bias, the general public and the media still has a recession mentality. This strongly suggests the bull market is nowhere close to being over. I've said here before that the best long term contrarian signal you can get is when the general public and media feels one way about the economy while the stock market is heading strongly in the opposite direction.....it doesn't get any better than that. The premise of the recently released movie Wall Street 2 is based on the collapse of 2008. The first Wall Street was filmed just before the stock market crash of 1987. That movie was based upon the boom times on Wall Street with the famous line "greed is good". I recently downloaded the latest Arcade fire album The Suburbs (which I like) released this summer. In the song Half Life 2 one of the lyrics is

When we watched the markets crash
The promises we made were torn

You might be thinking "so what?" Well, I'm telling you, something this subtle and seemingly insignificant is really quite significant. Anytime popular culture makes mention of the stock market like this, you just have to fade them, especially when the market itself is already going the other way big time.

What about the trading/ investing community? The popular opinion is that the recovery is simply a house of cards due to government intervention and that it's just a matter of time before it all falls apart. Everyone hates the fed. The unanimous consensus by far is that QE will not help the economy. The hatred towards TARP and other government programs was just the same and guess what? The government has actually made good money with some of these programs. Yes, not everything they did was profitable but overall they did a lot better than what most people expected.

The bottom line is that from a sentiment and fundamental perspective conditions are still very good for the bull market in the long term...in the short term, conditions suggest we are in red lining somewhat but there's still room for further marginal gains before we get this "correction" and I don't mean to sound piggish but I think we are going to see higher highs still. If we don't I won't be that suprised but neither will everyone else...and that's been the problem for the bears!