I've been commenting about a theory I've had over the past few weeks and this morning I believe it's come to fruition.
As we all know, we are in a period of extreme fear according to several indicators.
I've been theorizing that markets are currently in an “inverse bubble”. Basically, this means that markets are “unsustainably” low and we've reached a point at which prices will increase even in the face of bad news, and will be up even higher in the absence of news… I believe markets are largely proving this theory correct this morning….
Yesterday, the headline was that retailers reported reported earnings misses due to inflationary pressure. This is bad news and the markets reflected that yesterday. However, today, we haven't seen any new news and prices are climbing. Traditionally, in the absence of news, markets would be expected to trade flat. Although they are largely flat this morning, I'm seeing prices climbing, and if most markets close green today on no news, I believe this theory will be proven correct. Further, I believe that even in the face of inflation-related or other bad news, markets will continue to climb as the “inverse bubble” deflates.
Of course, all bubbles can stick around indefinitely, so this inverse bubble may never actually deflate, but I do believe we're at a point where markets can go up on no or even bad news.
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