The Bears Are Wrong
With the French elections going the way of the Euro bulls and corporate earnings continuing to exceed expectations and the high level details of Trump’s tax plan released, the stock market had itself a nice little run on Monday, Tuesday and half of Wednesday before getting a little tired. What a difference a week makes. The bulls made some solid ground with NASDAQ 100 and Russell 2000 seeing all-time highs and the S&P 400 only a whisker away. The Dow […]
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Date: April 27, 2017
Reality over Rhetoric. Bulls are Large and in Charge
I have long said and continue to reiterate on a regular basis that it’s not so much what the news is, but rather how the markets react. Clearly, the markets celebrated the French election results as the two main political parties were cast aside. Independent, Emmanuel Macron and nationalist, Marine LePen will face each other in a runoff on May 7. It doesn’t matter if you love or hate either candidate nor what they stand for, much like we saw […]
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Date: April 25, 2017
Dow’s March Low Breached But Bulls Getting Ready
There is not a lot different from what I wrote two days ago. Stocks continue to digest, pullback or whatever else you want to call this current pattern of behavior. The only difference on Thursday morning is the one of the major stock market indices, the Dow 30, breached its March low as IBM’s poor revenue number took the stock down almost $10. The S&P 500 is hanging in, but the S&P 400, Russell 2000 and NASDAQ 100 are all […]
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Date: April 20, 2017
Getting Closer to a Bottom
Stocks begin the week on their heels after a relatively ugly day on Thursday. The pullback and selling are not over just yet, but the market is certainly closer to the end of the decline than the beginning. With Thursday’s price action closing at the low of the day and the March bottom only a few points away, I would think that the major indices are heading for a quick trip below the March lows before the bulls put up […]
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Date: April 17, 2017
Banks Looking for a Bottom Amid General Market Strength
With earnings season in full swing and estimates ramped up by Wall Street, companies will really need to impress for stocks to get a boost. Banks are front and center right now. With the banking index down 10% since the early march peak, I am looking for a bottom in this sector and revisiting of the old highs later this quarter. However, the most important hurdle will be for this group to close above the 93 level, which will effectively […]
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Date: April 13, 2017
Two Favorite Canaries Looking Fine
The final two canaries are probably my favorites because I believe they are the most powerful and predictive. In every bull market of the modern investing era, both of these canaries gave 3 to 21 months notice that trouble was brewing. However, that doesn’t mean that every time these canaries warn, bear markets occur. It just means that they haven’t missed any. The first chart is that of New York Stock Exchange’s Advance/Decline Line which simply measures participation in the […]
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Date: April 12, 2017
Sector Canaries Healthy with Some Small Wounds
Turning to the four key sectors I follow, we don’t have as strong a picture as the major indices, but they are still okay. Semis are first and they have been the strongest for some time, almost too strong, but that’s a topic for a different piece. While they have yet to eclipse their Dotcom bubble high from 2000, they continue to make new highs for this bull market. Banks are next and after a dizzying pace following the election […]
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Date: April 11, 2017
Bulls Not Ready Just Yet
As we head into the holiday shortened week, the bulls don’t seem ready just yet for that next assault higher. Last Wednesday’s reversal still looms and there are small wounds that need to be healed. Don’t forget that our markets are closed on Friday for Good Friday and liquidity may be a touch lower because of the first two nights of Passover on Monday and Tuesday. All of the major stock market indices experienced sharp reversals last Wednesday and while […]
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Date: April 10, 2017
Index Canaries Breathing Nicely
It has a been long while since I last updated the Canaries in the Coal Mine, a semi-regular piece which has a very long-term focus on the health of the bull market. The analysis is only relevant at or near new bull market highs as I look for divergences in the major stock market indices, sectors and two other indicators. While helpful, it does not insulate bull markets from corrections; it just says that the final high hasn’t been made […]
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Date: April 10, 2017
Little Tantrum Beginning
The bulls began Wednesday with high hopes (and higher prices). By lunch time, it looked as if the market was ready to test its early March, all-time highs although the NASDAQ was already at new highs. But a funny thing happened on the way to Dow 21,000; the Fed released their minutes from the last meeting and the market did not like what they had to say. In essence, the Fed was preparing to test the markets on unwinding their […]
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Date: April 5, 2017
Q2 Begins with Higher Expectations
Stocks closed the first quarter without much fanfare and they head into Q2 with a strong seasonal tailwind. The major stock market indices are still not all in gear to the upside, but I expect that to correct itself this quarter with new highs across the board. Semis and discretionary are still very strong and I expect transports and banks to reassert themselves. Junk bonds had a very strong close to the quarter and they will need to continue that […]
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Date: April 3, 2017
Bulls Put Up A Stand
Yesterday, I wrote about the pullback getting a little old and the opportunity for stocks to find a low and rally. I offered that Dow 20,200 to 20,400 could provide some cushion. The Dow hit 20,400 yesterday morning and rallied nicely into the close with some follow this morning. Was that it? Pullback over? I am not certain, but we did do some buying yesterday to take advantage of the biggest bout of weakness this year. And it wasn’t much. […]
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Date: March 28, 2017
Pullback Getting Long in the Tooth
Stocks are set to open sharply lower today as the media and pundits assign blame to the GOP’s failed healthcare bill. I am not sure I really buy that notion as the bill was confirmed as dead during trading hours on Friday, but really, stocks began pulling back four weeks ago and accelerated lower as healthcare reform seemed less and less likely. Remember, it’s not the actual news, but rather how markets react. As I have been writing about this […]
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Date: March 27, 2017
Two Vital Canaries
After Tuesday’s “big” decline, there was some short-term damage done to most of the major indices. Rather than return immediately to new highs, I think we need a period to repair, which is not the worst thing in the world. A likely scenario is to see movement in both directions, perhaps into April, before the next leg higher begins. On the key sector front, semis and discretionary escaped most of the damage and should be poised to lead again. Banks […]
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Date: March 24, 2017
Teeth of the Pullback
As you know, for the past few months I have written about this overdue pullback to refresh the stock market. While I have written much about it, I am certainly not taking credit for getting the timing correct as I started discussing it many weeks before it began. Until Tuesday, the pullback, which began three weeks ago, has been about a shallow and mellow decline that has just gone sideways in consolidation mode. Tuesday was the ugliest day of 2017 […]
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Date: March 22, 2017
Going Nowhere
Well, at least last Wednesday was fun if you were a bull! The Fed raised rates by 1/4% as expected and stocks took off on the premise that there would only be two more interest rate hikes the rest of 2017. That hurt the banks and the economically sensitive sectors and gave a strong push to the defensive sectors. I remain skeptical of only two more hikes and stand by my forecast that four hikes are in the cards this […]
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Date: March 20, 2017
Fed to Hike Rates Today. Dow 23,000 Still On Track
Model for the Day As with every Federal Open Market Committee (FOMC) statement day, there is a model for the stock market to follow pre and post announcement. Certain environments have very strong tendencies while others do not. Three meetings ago was one of the rare times where the models strongly called for a rally on statement which was correct as well as a decline a few days later which was also correct. Today, there is a significant upside edge […]
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Date: March 15, 2017
Pullback Remains in Place. Junk May Hold Key.
The short-term pullback I have seemingly written about for weeks and weeks remains in place although I am certainly not taking credit for calling it in a timely fashion. The Dow, S&P 500 and NASDAQ 100 have all pulled back constructively while the S&P 400 and Russell 2000 are uglier. The three stronger indices are just about to kiss their 21 day moving averages, while their weak cousins knifed right through the 21 as well as their 50 day moving […]
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Date: March 9, 2017
Bulls Remain Large and in Charge Despite Pullback
We had a lot of negative news between Friday’s market close and Monday’s open, almost all on the geopolitical front with the vast majority surrounding President Trump. Of course, Deutsche Bank finally agreeing with the markets that they needed to raise capital was icing on the cake. In a weak market, that backdrop would have yielded a 1-2% lower opening on Monday. In a strong market, we’re talking about .25-.50% lower. Stocks are due and have been due for a […]
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Date: March 6, 2017
Volatility Genie Trying to Pop Out
After what has been celebrated as this huge, epic rally on Wednesday, the major stock market indices gave back all of their post 9:30am gains and then some on Thursday. I mentioned the other day that volatility compression leads to volatility expansion and vice versa. When the volatility Genie finally gets out of the bottle, we will probably see a sustained increase. I think we’re close to that now. Please remember, volatility does not always mean decline. It means wider […]
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Date: March 3, 2017
