richard russellWhat can you say about a market where one of the biggest permabears of the last 5 years is now feeling sorry for the bears?  I’ve tracked Russell’s work very closely over the years and I have to start wondering about the contrarian side of the cyclical view when I start reading commentary like this (via Russell’s Dow Theory Letters):

“I can’t believe I’m saying this, but I really feel sorry for the bears. First, they rubbed their hands together in glee as they waited for the roof to cave in via the fiscal cliff. Nothing happened. Then they got excited over the sequestration menace, and again nothing happened. Cyprus came and went, so what’s left? Oh yes, the debt ceiling — which, if it isn’t lifted, should collapse the economy. And it does seem we are in a currency war. Japan’s new central bank president startled the world by doubling its QE quotient. Japan, copying the Bernanke recipe, will buy everything in sight until Japan experiences 2 percent inflation.

How can I explain the weird disconnect between the stock market and reality? I fall back on the old Wall Street aphorism — “The market always does what it’s supposed to do — but never when.” I feel most sorry for the impatient bears. Waiting on the market to do what you think it should do can try one’s patience and nerves.

It looks as though the stock market will continue to head north until we receive indications that something is wrong. So far, nothing in the price structure has told us to be cautious. My guess is that this stock market will, when it is ready, produce some kind of “warning pattern,” such as a formation (H&S pattern) or a distinct non-confirmation in the Averages. Until then, my suggestion is to stay with your position in the DIAs.”

This article originally appeared at Pragmatic Capitalism. Copyright 2014.