Implode-o-Meter News - Hussman: The Bubble Right In Front Of Our Faces

Valuations have been obscene for some time. Historically, the thing that has differentiated an overvalued market that remains elevated or continues higher, and an overvalued market that plunges, is the preference of investors toward risk -- which is best inferred from the uniformity or divergence of market internals. Those measures have been unfavorable since the third quarter of 2014, which has opened the door to more frequent air-pockets and vertical losses. As with the 2000 and 2007 top formations, market peaks are often a process, and while recoveries on weak internals tend to be followed by fresh losses, the process can extend for months.
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In the absence of improved market internals, my impression is that the economy is increasingly likely to roll into a recession at the same time the equity market rolls into a rather severe bear market decline. If the Fed raises rates in that environment, the FOMC will likely be blamed for losses that are actually already inevitable as a result of the Fed's much earlier recklessness. If the Fed fails to raise rates in that environment, after having conditioned investors to expect a rate hike, it will likely be taken as a vote of no-confidence in the economy, and the FOMC will likely be blamed for losses that are actually already inevitable as a result of its much earlier recklessness.

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Hussman: The Bubble Right In Front Of Our Faces