Should you start selling SPX500 at record highs?

GENEVA - Nov. 13, 2014 - PRLog -- Investors have been asking the same questions since 2012. There has been a debate between bulls and bears that the equity market is overbought and these price levels cannot be sustainable.  It seems the market moves in one direction only and that is long. SPX500 hits its record highs at $2040, recently and it reminds us that despite all the technical and fundamental indications, this market is not ready to give up. Here are two reasons why you should not short the equity market just yet;

1-      The QE just ended last October, and Wall Street is convinced the interest rate remains at these levels until mid-2015. Interest rate hike is the first sign of growing inflation and it is a major indication that the recovery is in a right shape. Until the day the Fed starts increasing the interest rate the cheap money controls the financial market.

2-      Intuitional traders who are in the long side of this trade will not end this profitable trade. Just like 2008, everyone knows these prices are high but no one is willing to sell until there is a reason to do so. There should be considerable news or event to shake this market. We have seen in the past how market reacted to Ukraine crisis or coloration against ISIS, but each time we only observed a short time sell-off, which was another buying opportunity.

We still think the equity market specifically SP500 has more room to continue its run, however this long will be limited $20100 key level. For the next two months towards 2015 we predict a phase of consolidation and low volatility in both currencies and equity market.

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