Date: April 28, 2015

Short-Term Murkiness Continues

While I continue to be intermediate and long-term positive on the stock market, there remains a small cloud over the markets in the short-term. That usually means a pullback, which equals weakness to the tune of 3-7%. Market sentiment has become slightly less bullish, but not to the degree where I believe the next launch to all-time highs can begin.

Recent price action shows the S&P 500, S&P 400 and NASDAQ 100 poking to all-time highs and then being rejected by the bears. While that looks really ugly on a chart, historically, it usually just leads to some short-term weakness.

Additionally, the semiconductors have always been one of the better canaries in the coal mine for the tech sector and the overall stock market. Of late, we have seen all-time highs in the NASDAQ, finally eclipsing the Dotcom bubble nosebleed levels from 2000, but the semis are pinned roughly 100% away from the same level. That’s not troubling to me and won’t get repaired for years and years and years.

The short-term concern, which has been written about by data miners all over the Internet, is that the NASDAQ 100 has been rallying with the semis closing lower. Some days, we have seen the semis down more than 1% with the NASDAQ 100 higher and at yearly highs. Historically, that’s not healthy action and usually leads to a two to four week period of digestion or consolidation or sometimes outright weakness. However, I continue to believe that all dips and bouts of weakness are buying opportunities until proven otherwise. The climate for the bull market ending is simply not there.

This is the time to make a little market shopping list in case there is a small sale in May.

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Paul Schatz, President, Heritage Capital