There is something inherently optimistic and beautiful about the letter V, the way it just stands there balanced on a single point with a ballerina’s poise. We flash it with our fingers as a sign of victory or peace, or on lucky nights when we only want a table for two.

In the never-ending lines of the price and economic data charts so many of us spend our days fixating upon, the appearance of a V inspires confidence. It signals a robust recovery from some abnormality that was probably temporary or technical. When the V attempts to take shape but fails, it’s a different story altogether. It’s like the ballerina has stumbled and the audience isn’t sure if her next move is going to be a pirouette or a face plant.

So here we sit in the cheap seats as the dancing charts of the stock market stumble in their effort to complete yet another V-shaped recovery, of the sort that occurred with such regularity and rhythm over the last few years and began to feel routine. And regardless of how much we think we’ve gleaned about the plot of this ballet from what we’ve witnessed in the past, none of us knows for sure what will happen next. Still, a murmur builds in the crowd as predictions are spoken aloud.

“Ladies and gentlemen, when the SPX fails to break above a meaningful overhead resistance level, and then proceeds to fall below another key support level in the same session, historically it has not proved to be very good tape action,” is how Jeffrey Saut, chief investment strategist at Raymond James, describes the dance.

David Fuller's view

It has not taken much to bring out the bears in this bull market cycle.  One day they will be right, and we will hope to be among them, but they have usually been contrary indicators. 

We will see plenty of choppy market action, which understandably makes people nervous.  It also creates buying opportunities.  Yes, our economies and politics are frequently flawed.  However, if countries were synchronised in a period of sustained, robust GDP growth, share valuations would be considerably higher and central banks would be lifting short-term interest rates in an effort to choke off overheating and inflation.  That would be a real selling opportunity. 

Today, the scariest fundamental situation, in my opinion, is the NYSE margin debt used on Wall Street, which I have illustrated on a number of occasions.  However, it is not a timing indicator.  Moreover, I do not know to what extent this leverage has been used for short rather than long positions.  There is more than enough leverage in play to produce a temporary market accident, although probably not at this time, based on my guess.