Archives for January 2018

Junk Bonds Stepping Up. Everything Seems PERFECT!

Snowmageddon ’18 is here!

Let’s make it two straight days in the New Year and two straight all-time highs in the major stock market indices with Dow 25K up next which was my next target after 23,000. After five straight closes above 25K, 30K will likely be the next target. So far, stocks have done nothing wrong and I do not believe the rally is ending here. However, I do think that the market is going to form a short-term peak over the coming week and either pause or see a mild pullback before moving higher again.

Each successive rally is its own test and stocks haven’t failed a test in an awfully long time. If you want to find fault, you can point to the lagging banking sector or high yield bonds although the latter looks like its trying to kick it into high gear and lead now. Participation has been strong and excellent with the NYSE A/D Line seeing all-time high after all-time high.

Sentiment has certainly become greedy and giddy which is a negative. It seems like everyone is bullish on 2018 which concerns me, however, there is a scenario that I have mentioned before where the masses throw in the towel and stocks melt up to their final bull market high above Dow 30,000. For now, continue to enjoy the gains. Stocks are priced for perfection without much margin for error. I will try not to overthink it…

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Santa Arrives Late. Bulls Back in Control

Between my concerns about the last five days of the year and then the bullishness of the first day of the New Year, the market has been cooperating. Monday’s burst to new highs in essentially all of the major stock market indices puts the bulls firmly back in charge with the likelihood for some upside follow through on Wednesday. None of the major indices are doing anything wrong at the moment and they are all in sync to the upside. As such, unless the bears surprise today, the Santa Claus Rally will not fail to call and bears will not come to Broad and Wall, at least not in the near future.

While discretionary and transports both say all-time highs to begin the year, banks and semis did not. While neither of the laggards look worrisome, it’s something to keep in the back of your mind for later this quarter, especially if they start to decline when everything else rallies.

Sentiment is getting a little giddy as options traders are betting on a continuation of the advance. They don’t normally win. It looks like stocks should be building towards a short-term peak over the coming week or so before heading higher again later in January or early February to what could be a more meaningful high.

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Weak Close to 2017 Indicates Bounce to Begin 2018

Back to work. Lots going on. Many crosscurrents. I hope you had a safe and enjoyable New Year’s celebration. I am still thawing out from so many days in Vermont without seeing the thermometer get above 0. The stock market begins the new week, month, quarter and year with a rather disappointing close to 2017. It has been something on my radar screen for a few weeks as recent history has not been kind to the bulls over the last five days of the year. The S&P 500 needs to gain 11 points over the next two sessions to avoid triggering a failure in the Santa Claus Rally which I wrote about HERE.

Favoring the bulls on Tuesday is a trend which is active because the last day of the month closed lower, but the month was still higher. It has a high degree of accuracy. Additionally, the last week of the year was down in an otherwise up month and year which puts the market in a position to bounce to begin the New Year. During this bounce, the NASDAQ 100 is the odds on favorite index to lead higher.

Working against the bulls is that all five major stock market indices put in somewhat ugly reversal days, meaning they began the day at their highs in positive territory, but ended it at the lows in negative territory. All four key sectors followed suit to the negative.

High yield bonds bucked the trend to finish higher although they have been lagging and under pressure for the past two months. Crude oil, gold and other commodities also continued their uptrends and it will be interesting to see if they can hold ground. Finally, the Euro is at a crossroad and the currency may hold the key to what we see in equities over the coming few weeks.

Lots going on. More than any other time of the year.

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