(Marketwatch) Miller Tabak’s chief market strategist Matt Maley said that while there are more signs the market top is getting closer, the current rally has longer to run.
A slight pullback last week hasn’t changed Miller Tabak’s view that the Santa Claus rally (referring to the tendency for the stock market to make gains over the last weeks of December) will continue for a while longer, perhaps even into early next year. “We just feel that the liquidity the Fed and other global central banks are providing will make it tough for the stock market to fall much over the next 4-6 weeks,” Maley said.
However, he said there were signs that a market top was “coming before long” and that a large part of this rally had already taken place. The signs include last week’s declines, a string of bumper initial public offerings, and the CNN Greed & Fear index pushing up near “nosebleed levels.”
But “too many pundits” pointing to these signs was another reason the top wasn’t imminent.
“Sometimes the market climbs the wall of worry and when almost everybody is pointing out the froth that exists in the market — it’s rarely a time when the market actually tops-out.”
Maley said the blockbuster IPOs of vacation-rental marketplace Airbnb, food-delivery service DoorDash and artificial-intelligence-software provider C3.ai, which all surged on debut last week, were leading to comparisons with the IPO market of 1999 before the 2000 dot-com bubble crash.
“Yes, this is very reminiscent of those days, but we also have to remember that the stock market did not top out until March of 2000. In other words, even though the action in the IPO market last week is indeed a concern, history tells us that these frothy IPOs tend to take place several months before an important top,” he said.
While the present rally will last a bit longer, Maley said 2021 was going to be a “tougher year than the consensus is thinking right now.”
