Don’t Fight the Fed: Biotechs at RECORD Highs

One of the mainstream’s former bullish meme has long been “Don’t fight the FED”. This meant that when the FED has assumed a dovish stance then such sentiment should percolate into monetary policies that has been supportive of stocks. So long stocks.

But as recently mentioned, such 'dovishness' has become more restrained. Central bankers have adapted what I call as: “I recognize the addiction problem but a withdrawal syndrome would even be more cataclysmic”. For instance, US Fed Chairwoman Janet Yellen has recently warned of overvalued biotech and small cap stocks as I pointed out here 

Does the market care, apparently not.

 

As proof of the self-feeding frenzy of a mania phase as I explained last weekend, the Don’t Fight the Fed appears to have gone into the opposite direction.

Notes the Zero Hedge: (bold original)

Biotechs are up 33% from the April lows and have reached all-time record highs and have now totally ignored 2 warnings from Yellen - who just last week was heralded as omnipotent. This is the best 3-week run in 13 months..

So people conjure up any rationalization to justify their actions.

Yet the “Best run” has merely been a symptom of the fast accelerating manic phase. 

With the S&P closing at 2000, the milestone high has been accompanied by other landmark events

Notes the Wall Street Journal’s Money Beat (bold mine)

The S&P 500 has gone 65 trading days since it first finished above 1900 in May…it would mark the fourth quickest 100-point move in the index’s history, according to WSJ Market Data Group.

The table below provides a historical look at 100-point milestones for the S&P 500 dating back to 1968, when it crossed above 100 for the first time. It needed 11,208 trading days to reach that mark.

The second-longest time frame that spanned 100-point moves came from 2000 through 2013, when the index needed 3,298 trading days to go to 1600 from 1500. Of course that period included two major bear markets during the bursting of the tech bubble and the financial crisis.

It’s a fantastic showcase where the higher the benchmark, the greater the risk.

But who cares about risks, stocks have been destined to rise forever!