Some notes of observation as new highs once again dominate the headlines. As I wrote a few weeks ago in Thin to Win these rallies are not expanding at all. Indeed they appear to be getting weaker underneath. I’ll show you some data points.

Firstly note the current structure of the market. Most all gains appear via overnight gaps, then the action devolves into nothingness and non tradable 2-3 handle ranges. This has been the action for the past week:

Case in point: Yesterday the $SPX stayed in a 2 handle range for 2 hours into close. Not a market of engaged buyers and sellers. Today again we see another gap up and the game continues.

Yesterday’s new all time human history highs again came on shoddy internals. $NYAD was again negative.

The trend: Gap up and then deterioration in the internals. Every day:

Yet $SPX closed flat with $NYAD on a negative 722 print. Magic levitation.

Throughout the day new highs were printed on both $SPX and $NDX.

New highs on $SPX with 38% of $SPX components being below their 50MA and 30% below their 200MA:

New highs on $NDX with 43% of $NDX components being below their 50MA and 35% below their 200MA:

Whatever you call it, don’t call it an expanding rally. The charts say otherwise.

What’s driving all this? My view: The big cap stocks don’t sell because folks don’t want to lock in capital gains before the year is out, ETFs keep allocating cash and the big caps get their allocations and the market is waiting for more free money in form of tax cuts so the bubble keeps rolling higher non stop. No sellers. This will continue until a trigger gets the whole float to collapse on its own disconnected weight.

But for now:

The watershed moment will come when people want to sell. How will markets handle a situation with sellers suddenly appearing? Nobody knows. But clearly the Fed is worried about it. From the recent FOMC minutes this quote: “They worried that a sharp reversal in asset prices could have damaging effects on the economy.”

Can’t have that.