In September I discussed the prospect of “why” stocks could be ready to melt up going into the end of the year.   At that time I discussed some commentary by Bill King who had stated:

“Ironically, the market’s zest for Yellen instead of Summers could doom her reign if she becomes Fed CEO.  The market will go into Abenomics mode if Yellen is crowned. This will create multiple bubbles that will eventually burst and cause horrors of biblical proportions.

In order to disabuse the market of the notion that she is easier than Easy Al and Ben Bernanke, Yellen will have to be tough from the inception of her reign. If this occurs, the market will throw a temper tantrum of biblical proportions.

We opined last week that an in-line QE taper ($10B to $15B) could ignite a short-covering melt up in stocks. The totally irrational Summers relief rally might mitigate the taper relief rally.

With the benefit of options and futures expiration this week, stocks are extremely vulnerable to upside manipulation and short squeezes.”

I stated then that:

“This is an interesting piece of commentary for several reasons.  First, the current cyclical bull market is already fairly well advanced, in terms of both price and time, and when combined with trailing valuations above 18x and rising should elicit some concerns.  This is particularly the case when earnings growth has begun to deteriorate.  Secondly, and to the point of Bill’s thesis, is that the final stage of every bull market cycle has been a parabolic push as irrational exuberance takes over rational thought.

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Lance Roberts is the General Partner & CEO of STA Wealth Management, Host of the “Streettalk Live” Daily Radio Show (streamed live at www.streettalklive.com), and Chief Editor of the X-Report and the Daily X-Change Blog.
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