Well, from the looks of things, it may be that I am a day or two or three late on getting you this video. However, this short review on market structure (we focus on the SP 500) will give you a sense of what the big picture looks like in market language.

It is timely for one reason – we have arrived at the very top of the channel noted inside the video when we taped in a few days ago.

Be forewarned.

The video speaks of crazy stuff and I mean really crazy ideas like taking advantage of market selloffs, buying when others are screaming at the top of their lungs that the end is nigh, being aggressive and thinking long-term when the Schiff’s of the world tell you to buy only what they sell – gold.

Anyway, take a few minutes, a large bottle of TUMS and maybe even a cup of double caffeinated coffee while you enjoy the video here.

By the way, I am told by my better three-quarters that the coffee will help because I am boring. So there : )

On to The Big Stuff

You know the thing that is not showing up in all the data we are fretting over?

I will give you a hint:

It starts with “re” and ends with “cession.”

See, I may indeed be boring but I can be awfully funny at times.

Seriously folks, just today, we had construction spending – a pretty big driver of things to come – hit an ALL-TIME high! Yes, all-time.

For those in the upper level, that means we have never spent more on construction….ever. Year over year (YOY) growth is solid too.

Add that to the better jobs data from small business (the real driver of jobs) this morning and top it off with the better than expected GDP data and consumer spending earlier yesterday – and what do you get?

A world whose best days are still ahead.

What to do?

PRAY for more corrections. Pray for setbacks – pray for the fear to last for an awfully long time. The longer it lasts – the longer the next leg up the large mountain ahead will become.

Note in the video above that we show a long-term chart of the S&P 500. It will clearly define the “lunch-stop” perspective we have referenced for months.

The bull is resting…that is a good thing.

Earnings “recessions” are periods where companies retrench, retool, refocus, rebuild, regenerate, renew….and go on to higher earnings in the future – with better products, better services, newer tools and better ideas.

That is what we do – that is what America is all about. As Warren states much better than I:

“For 240 years it’s been a terrible mistake to bet against America, and now is no time to start.”

I just wish the bad new bears were still getting their air-time.

I suspect they will on the first pause.

Hope for it – pray for it, help them shout from the rooftops. Make certain you stand ready to continue to take advantage of the scary stuff. When it hurts the worst – when you fear it the most – when you are certain the horizon is dark…often coincides with award winning investment values.

And Now Some Stuff From Guys Smarter Than Me

Here is a great piece from our great friends in Scotland – Alan Steel and his team are the very best in Europe…make sure you read his thoughts here.

And from Calafia – a few charts and comments:

In the first chart above, we see a measure of equity risk premiums. This is a great way to view what the market is really saying – I will be blunt:

Investors are scared.

We can thank all the experts for that.

But here is the deal:

Note the hand drawn red lines – it equates today to the last times we saw this much equity risk premium – the lows of the 70’s – and just before the last secular bull market began.

Calafia adds this:

“Extremely low Treasury yields are also a good sign that the market is consumed by pessimism, given that the earnings yield on equities is 5.7%. Choosing 10-yr Treasuries with a yield of only 1.7% in lieu of equities yielding 400 bps more (and considering further that equities have far more upside potential than bonds at this point) only makes sense if one is convinced that earnings will suffer significantly in the years to come. So far, earnings are down only a little more than 2% in the past 12 months, and most of that is coming from the oil patch. Put another way, the current P/E ratio of the S&P 500 is 17.4, whereas the P/E ratio of the 10-yr Treasury is 58! To pay so much for the presumed safety of Treasuries is to have truly dismal expectations for economic growth and corporate profits.”

In the second chart above we see the fed funds rate and the price of crude oil inverted and overlaid. More on it from Calafia:

“About 10 years ago, I put together the chart above in order to illustrate how tight money (as reflected in rising real short-term interest rates) and high and rising oil prices conspired to trigger the recessions of 1990-91 and 2001. (As I described it then, the economy gets “squeezed” by expensive money and expensive energy, as illustrated by the blue and red lines converging.) The same thing happened with the recession of 2008-9, as oil prices reached record-high levels and the Fed raised the real Fed funds rate (its primary policy tool) to over 3%. If tight money and expensive oil have traditionally been bad for the economy, then today’s negative real rates and cheap oil prices are likely a godsend. This suggests that the economy can do better than the market expects, even if it only continues to grow at 2 -2 ½%, as it has since 2009.”

And last but not least – we have this chart – depicting yet another slice of fear:

I sound like a broken record – but even as today’s rally unfolds, air-time is being taken by those who tell us its already a bear market.

Face it – it’s good news:

Markets are still very worried, of course, as the chart above shows.

The VIX index above is unusually high, the 10-yr Treasury yield is quite low, and equities are still down almost 10% from their highs of last May.

The pattern in the above chart (i.e., spikes in the Vix/10-yr ratio coinciding with plunges in the S&P 500 index) has been repeated quite often in recent years, only to be resolved with higher equity prices as fears decline and confidence returns.

The recent decline in the VIX/10-yr ratio is thus encouraging, as is the lack of evidence that the problems in the oil patch are spreading. Still, there are many ongoing calls for a sharply lower market and a worsening of economic conditions.

As scary as it seems at times, there is still no long-term reason to panic – and if the crowd panics anyway – use history as one of your best teachers – those have all been places to build for the future.