Strong economic growth and low unemployment rates signal - as explained by President Trump at least - that you've never had it better America. Top that package of awesome off with an ever-increasing stock market bow and only a fool would argue that these are not the best of times and that we have reached a nirvana-like plateau of ongoing prosperity... right?

Of course the picture of a full employment economy is tarnished a little by the lack of participation...

And while hope-filled economic growth forecast for the year push on to cyclical highs, 'real' economic data is gravely disappointing...

But as fast as the economy is supposed to be growing, the stock market is outpacing it - sending Warren Buffett's favorite stock market indicator to pretty much its highest levels ever...

And as disappointing as the economic data becomes, high-flying tech stocks remain impervious...

Ignoring the bond market's long-term view that all is not well in the US economy...

And the short-dated rates market's view that recessionary pressures are building (as the eurodollar curve has now inverted) - but cyclical stocks continue to buck that trend relative to defensives, ignoring the growth fears increasingly priced into credit markets...

So to summarize - stocks know better than the bond and eurodollar market, have seldom been so expensive and refuse to fear anything in the 'real' economy, or price in the potential for anything negative to ever happen anytime ever again.

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There's just one thing... as stocks continue higher, supportive breadth is utterly collapsing.

As Morgan Stanley notes, and is extremely evident in the chart above, the percentage of Nasdaq numbers making new 52-week highs versus the Nasdaq composite price level.

We know there are issues with comparing stationary to non-stationary series, but nevertheless we make two simple observations:

1) Since we started our defensive rotation call in June, the number of stocks making new highs has been in a clear downward channel with lower lows and lower highs and

2) the index price level has continued to press to near new highs. 

In other words, fewer and fewer stocks are carrying the burden of lifting the market, a sign of exhaustion and, in our view, a bad signal for further price gains.

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So the simple question is - who do you believe? Which market do you trust? The increasingly narrow 'basket of stocks' that are maintaining the illusion of prosperity for the masses - or the hard economic data and beliefs of the bond market?