Early in 2017 I made a prediction. I knew all year long that we would see one analyst after another try to call a top in this bull market. I also knew every one of them were going to be wrong. A perma bear bias is a great way to sell newsletter subscriptions, but it is completely worthless market analysis.

And just like I predicted, every other day we would see another analyst come out predicting a top. When we moved into the fall, the predictions for a September or October crash became deafening. In reality what happened was 2017 produced one of the best years in a long time.

Folks, I’m going to let you in on a secret. Bear markets don’t just appear out of nowhere. They require a catalyst. Since 2000 that catalyst has been the bursting of a bubble and a spike in inflation. Inflation is what crushes consumer spending causing the economy to stagnate and decline. Every recession since the ’40s has been preceded by a spike of 100% or more in the price of oil, in a year or less. In 2017 we had neither one of these requirements. Stocks were in a steady up trend but not even vaguely close to the kind of parabolic structure that would indicate a bubble forming, or more importantly a mature bubble ready to pop.

And commodity inflation was at one of the lowest levels in decades (although stock market inflation, inflation in education, and health care, home prices, etc. was running rampant. This kind of inflation however does not trigger a recession.)

Now I’m seeing bearish analysts using sentiment as a valid reason the stock market is about to top. According to these people market sentiment has reached a stage of extreme complacency. Again this is complete nonsense. As I have shown before we aren’t even vaguely close to the kind of extreme market complacency that exists at bull market tops, much less a bubble top (and I think years of QE is going to ultimately produce a bubble before this bull market ends).

At bull market tops small retail traders become extremely complacent, and when they do they buy a lot of call options. They maintain this aggressive behavior for many months. Look at the chart below and decide whether the current market sentiment levels are even vaguely close to the last two bull market tops. Now keep in mind I think we have to produce a bubble before this bull market ends and look at where sentiment was during the last bubble in 2000.