Bull markets end when there are no more buyers

Bull markets end when there are no more buyers.

Buyer exhaustion doesn't appear to have been reached yet. I think one of the reasons is each time buyers turn into sellers and decide this market run is over, they then look at their investment alternatives (cash and bonds) and run back into the market justifying or telling themselves the Fed has got their back.

Each move higher saps the strength of buyers. At some point, buyers are bought out and are then caught in the next pullback buying the dip (because that has always worked before). They then get trapped when the market falls again and they double up. Not because they believe the market is a good buy, but because they have always won when they bought the dip. When the market fails to perform on the upside, they find themselves fully invested (or in the case of traders quadrupled up...initial position in the money...purchase at the high chasing momentum...adding when the markets falls 5% because it is a BTD market...putting the fourth position on when market down 10%) and now find the market down 15%. This is serious gut check time. Do they acknowledge they have been wrong and cut their positions, or do they gamble and quadruple up?

Whatever the case, it feels as though the market knows their mind, their weaknesses and their positions, and it is able to prey upon all of those things, forcing them into bad decisions. Welcome to the humbling.

We need a pullback, BUT...

In my opinion, the market needs a pullback, BUT this is a buy the dip market.

I don't think we're going to see a 20%+ decline, however much this would cleanse bullish ardors. If we're lucky, we'll get a 10%-15% correction, then it is off the races again (maybe not quite the races, but a 1200 target on the S&P 500).

The time to sell this market will be when the authorities try to pass the baton from the public sector to the private sector. That is not likely to happen before the middle of 2010 for monetary authorities and may never happen on the fiscal side of the ledger (just a little tongue in cheek). The critical point will be to anticipate when the market is going to get antsy about the transition (it may be six months beforehand, it may be longer or shorter).

Note: Geopolitical uncertainty brought about by an attack on Iran by Israel, a large terrorist attack on US soil, or heightened trade tensions could throw a spanner in the works.