Is the Stock Market Top In?

The pool of greater fools willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.

Is the top in U.S. stocks in? The consensus is "no"--corporate profits are rising, the U.S. economy is recovering and has reached "escape velocity," i.e. it can continue expanding even as the Federal Reserve ends its monetary stimulus (QE) and plans the first increase in interest rates since the zero-interest rate policy (ZIRP) was launched in response to the Global Financial Meltdown.

Many observers have noted that global capital flows (from the risky periphery to the less-risky core) favor U.S. stocks and bonds--another reason to see the 5.5-year rally continue to new highs.

The case for the top being in rests on three pillars: extremes in monetary manipulation (oops, I mean policy), sentiment, leverage and liquidity, the rise of the U.S. dollar and the diminishing returns on monetary stimulus and the repression of interest rates.

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