What's Next?

Rollercoaster rides are unnerving on the way up and then thrilling on the way down. Stock markets are thrilling on the way up and unnerving on the way down. The market had a thrilling meltup late last year and a slightly unnerving selloff during the first three days of the new year. Last year's yearend rally has fizzled so far this year.

That's mostly because investors are having second thoughts about whether the Fed will cut the federal funds rate as much as many expected, though not us. In addition, they've just realized that China's recession can depress the earnings of American companies doing business over there. Some are simply taking some profits in the SMidCaps that had a thrilling ride late last year. Furthermore, the market may simply be too crowded with bulls as evidenced by the highly elevated bull/bear ratios with their rollercoaster rides (chart).