Additional thoughts

A realize that a lot of people out there, me included are stunned by this parabolic upside move in the market. The NASDAQ just made an all time high and it looks like that upfilled gap at about SPX 3350 is acting like a magnet destroying whatever bears are left along the way.  I get that the market is a  forward looking indicator, but it's very difficult to make the case that this move in the market is totally based on rational behavior.  You normally see such blow off moves during economic boom times not during times like this. In my opinion, there continues to be an element of woefully out of position investors/traders who drank too much of the doomer koolaid and are now being forced to cover or go long in combination with a speculative fever of newly minted millennial day traders. Remember back in mid May when the 3 bears Drukenmiller, Teper and Gundlach came out and bashed the market? They and all who listened to them have been  ran over and humbled and forced to cover shorts just adding more fuel to the fire. What I've been wrestling with myself to determine is just how legit this move is. Here's a breakdown of what I like about this advance and what I don't in terms of it being a sustainable move.

What I like:

• The underlying bearish/skeptical/skittish sentiment that's out there from both the "pros" and "retail" including a large portion of the amateur trading community which I like to call the permabear trading community because since 2009 the majority of traders out there have had a bearish bias towards the market. Although we may have seen a lot of the above give up or get blown out of bearish trades, they are not embracing the market at all. They just keep making sarcastic scoffing comments about the Fed and how everything is rigged and all it takes is the slightest of dips to get these losers excited about the downside. This is not unlike what I saw in 2009. Bearish/skeptical/skittish sentiment is the lifeblood of a bull run. Once everyone has embraced the market with most bears too afraid to bet against the market anymore, that's when the market is vulnerable for big trouble.
• Credit markets have dramatically settled down with investment grade bonds yields back to pre-crisis levels and junk bond yields on there way to that too. You can complain about the Fed intervention in these markets all you want, but it has worked and the Fed didn't have to do much heavy lifting, their verbal backstop was good enough. Maybe one day this all goes wrong and you can whine and complain all day about how the Fed is taking away "price discovery" and "free markets" but that's not going to do you any good. Either you embrace it or don't play. 
• The yield curve is normalizing. Although a rise in bond yields often puts the brakes on the market, yields are rising from ultra low levels and have plenty of room to unwind before they  become truly restrictive to the economy. A positive yield curve does wonders for the banks which have been battered for quite some time. It's also a signal of a healthier economy going forward.
• The large amount of cash on the sidelines via money market funds which is historically bullish. Once you have this much money on the sidelines and the market gains upside traction  to this degree and duration,  the market advance has had plenty of staying power. 

What I don't like

• The speculative action of junk stocks like HTZ. This stock is literally worthless and yet it has gone from $0.40 to $5.50. This is pure greater fool buying and short squeezing which means some of that behavior is most definitely occurring in general stock market too.  Believe it or not, it is not uncommon to see the worthless shares of bankrupt companies behave like this. I've seen it many times before. What it indicates is that in contrast to the permabear trading community, there is a growing cohort of naive permabull traders most of which are probably millennials who haven't experienced the massive pain of losses and therefore didn't become the embittered fucks that make up the generally older permabear trading community whom at one point in their life acted the same way as these naive millennials! Apparently, a lot of these traders are using Robin hood or other no commission brokers to make their trades. They are also buying equity call options hand over fist it would appear. For now these millennial traders are getting the better of the permabear trading community and even the pros but such action is indicative of speculative fever which is not sustainable. At some point you run out of bears to squeeze and longs to jump in and you get a collapse. But the speculative nature of these advances can go longer and higher than you thought was possible. Just look at run up of the bitcoin bubble before it burst.

• The gap and go nature of this bull run. This is simply not the type of normal behavior you see in a sustainable bull market. It is more indicative of forced buying from short,  panic buying and chasing. Again, such a run can last longer than you think possible but history shows that ultimately such runs get undone in a big way. 
• The parabolic shape of the rally. This again indicates an unsustainable panic buying situation. It's always difficult to know just how extended the parabolic move could go for but it's clear to me that it's getting late. That unfilled gap in the SPX could very well get filled first before it's over though.  
• There are plenty of unfilled gaps well below where the market is now. I'm not a believer that all gaps must get filled (they don't) but the fact that there's so many makes me believe that at least a few of them will. 

Conclusion

• You got to respect the upside momentum and there's a decent chance we see 3300-3350 before this ramp is over. Although the market is quite ST overbought now.
• When the inevitable correction happens, it will probably be a multi-month affair with at least 1 trap door moment. I will be watching closely to see how people react to it. If everyone runs for cover and the speculative excesses get washed way without too much damage that would be a good sign that the bull run has staying power. If instead people are eagerly buying the dip that would be a bad sign. 
• Despite some clear signs of froth there's still a bullish long term underpinning via high cash on the sidelines and a general distrust/ skitnessess  about the market. 
• If I was looking to make a longer term short bet I would need to see the following: AAII bulls/bears to hit 2:1 bulls vs bears, VIX sub 20, big spike in fund flows. Until then, I classify myself as agnostic. i.e. too late to buy, too early to short for longer term trades/investments. 
• Gun to my head: We get a minor dip and then rip higher one last time before we get a multi-month consolidation/correction.