Sentiment not favorable for bulls but still not truly frothy

Bears are throwing hissy fits because they can't believe the stock market is ignoring the corona virus. As I said before, this is old news now and even with the latest "jump" in reported cases the stock market simply doesn't give a shit and rightly so in my opinion because ultimately, this is a temporary problem which has nothing to do with underlying economic fundamentals. Any disruptions caused by the virus are not permanent and so once things go back to normal, any kind of production that was delayed will be made up for and there will be a surge in activity. Second of all, the Chinese central bank is stepping up to ensure there are no liquidity crunches. The lessons of 2008 are still imprinted on the brains of the authorities.

I've been repeating here for a long time that the purpose of the stock market is to make fools out of as many men as possible. In order for there to be a meaningful correction you need victims. You need enough people who have weak handed long exposure. The sources of such holders come from retail equity investor/traders, option traders and hedge funds. The less exposure these jokers have the harder it will be for the market to correct. As of now, retail equity investors have only very modestly been getting back into the market as there has been 2 weeks of modest inflows. Option traders have once again flipped back to buying calls hand over fist after getting shaken out a couple weeks ago. Same goes with the hedge funds, they have turned bullish again after getting shaken out a bit a couple of weeks ago. AAII sentiment is once again showing bulls outnumber bears but not by an extreme margin. So, all in all I would say that the market is only ripe for a modest to moderate pullback no greater than 5%. and most likely in the 2-3% range. The other scenario is that we simply keep chugging higher to DOW 30K and NASDAQ 10K without much of a dip. I believe those numbers will get hit at some point this year. It would be piggish to press long bets at this time but also still dangerous to go short aside from the very skillful and nimble hit and run traders. When the market makes a fresh all time high, more often than not it continues to make all time highs and so betting against the market in such case more often than not results in losses.

Keep an eye on the 10 year bond. So long as bond yields remain relatively suppressed, it is bullish for the stock market longer term as it implies underlying pessimism and justification for higher valuations.  The fact that the 10 year is so low right now is another sign that any pullback we do get from here will be modest.