After a fast and furious rally by the bulls, we saw a little change on Friday as “too far, too fast” became my theme. I thought the best case would be for a pause to refresh or some backing and filling. That appears to be the case as the new week begins. I am very keenly watching for the market’s reaction if and when it gives back all of last Wednesday’s huge, post-election gains. That should speak volumes about the next week or so. On the Dow, that’s roughly 25,600 and 2750 on the S&P 500.
Not a single thing has changed in my thinking that an immediate return to new highs could very well spell the end of the 10-year bull market. That remains in play, however, as I have been discussing, the odds do not favor that behavior. Rather, stocks are “supposed” to see another decline to build a better launch pad for the next rally to 27,000.
Where is leadership, you ask?
It certainly isn’t in the banks or semis. That’s a little troubling. High yields bonds are about to make new lows. The NYSE A/D Line isn’t much help at this point as it basically looks like the stock market. As I keep offering, the defensive sector is standing out. Utilities, staples and REITs. It’s great if you own them, but not comforting for the overall stock market. Another fun week ahead!
