Archives for November 2019

Bullish Week Coming. Healthcare Leading

Stocks are set to open higher to begin Thanksgiving week where we only have 3 1/2 days of trading. This week is typically a good one for the bulls. Last week, the stock market treaded water and the bears definitely had a chance to make some noise. I doubt they will have the same opportunity this week unless a piece of random news hits out of nowhere.

As you know, I have been neutral to a little negative in the very short-term for a few weeks, not willing to commit new money just yet. I have written about the S&P 400 and Russell 2000 (mids and smalls) seeking to step up and lead the next leg higher for stocks. I am still patiently awaiting for signs this change is happening.

I really love how three of my key sectors have been behaving lately. Semis, banks and transports have all pulled back very mildly and look like they are readying themselves for a run into year-end. I just don’t think that run will begin right here and now. Five weeks is a long time to the end of December, but I don’t have strong conviction on that one.

Healthcare is a sector that has really surprised me this quarter. Historically, this group does not garner much positive attention heading into a presidential election year as both sides like to vilify and blame the companies for price gouging and taking advantage of patients. This plays very well with the electorate as you can imagine. Look at the chart below. The horizontal blue line is last all-time high made in October 2018. Just last week, healthcare quietly broke out to the upside and continued running. This move isn’t garnering much attention from the media nor pundits, but it’s certainly an unexpected move, at least in my eyes.

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Bulls Biding Their Time

Stocks continue to trade very quietly lately. It seems like every day there is a narrow range from high to low. And that’s okay. Although I have had short-term concerns for the past few weeks, the bulls have done an amazing job of thwarting each and every little attack by the bears. As I have said a number of times, stocks will either mildly pull back or move sideways for several weeks. Right now, the latter is the preferred scenario, but I wouldn’t get super comfortable just yet.

I really love how the laggard, left for dead, mid and small caps are biding their time right around key breakout levels, those horizontal blue lines. It’s the epitome of a tug of war between the bulls and bears. I happen to feel strongly that after the next little bout of weakness hits, these two indices are ready to bust out and give the market the ammunition it needs for the next leg higher. And I think that will begin in December.

And before I get the emails, the Dow, S&P 500 and NASDAQ 100 all look similar and very constructive as they have all already broken out to new highs and are now working that off. Many, many times a security will have an obvious break out, only to stop in short order for a pause to refresh that works its way back to that key break out level. Sometimes, the instrument will regather itself and surge higher while occasionally it will completely fail after sucking in the bulls and move quickly in the opposite direction. You can see how much air lies between the current price below on the S&P 500 and the horizontal, blue line which is where stocks broke out.

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Bulls Still in Charge, But

As stocks headed into November the Dow Industrials, S&P 500 and NASDAQ 100 were all at or very, very close to all-time highs. I know this comes as no surprise to my readers as I have written about my upside projections over and over and over. Dow 28,000 was next, a target I began discussing at the end of 2017. Five straight closes above that level will open up my long, long, longstanding target of Dow 30,000, a pie in the sky number I first floated when the Dow closed above 20,000 several years ago.

You certainly wouldn’t know stocks have behaved well this year if you listened to or watched the media. Almost all of the stories are just so negative and even dire. Earnings are bad. The economy is essentially in recession. Europe is a disaster. China is falling off a cliff. Tariffs will raise prices for consumers. The President colluded with Russia. Trump to be impeached. Sanders and Warren are attacking wealth and success. It’s enough to send you screaming into the night.

This bull market has feasted on all of the hate and negativity. No bull market in history has been more disavowed than this one. Yet every single time stocks weaken, every bear comes out of the woodwork with forecasts of a bear market, economy about to plunge and a repeat of 2008 or worse.

Most of those clowns just write newsletters and try to swindle people out of their money by predicting constant gloom, doom and Armageddon. Negativity definitely sells. Eventually, a day of reckoning will come and you can bet that those same clowns will claim success, fill the media with their nonsensical ads and try to peddle even more expensive newsletters, completely ignoring history or hiding from it.

The bull market is alive and reasonably well and will live on into 2020. Next year will likely present some challenges, but we will cross that bridge when I start to work on my 2020 Fearless Forecast.

For the most part, I have been positive on stocks throughout 2019 with a few exceptions, especially in June and July. At no time did I see the bull market ending nor a significant 10%+ decline coming. Buying any and all weakness has been my theme and for the most part, that has worked. Of course, like every year, I did have my share of flops when I dialed down on a more granular investment level.

I remain slightly negative in the short-term due to a host of small concerns I outlined yesterday in Street$marts. I will offer more detail tomorrow. Closing below Wednesday’s low should confirm a short-term peak has been firmly established and then we will look for weakness to turn positive again.

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Target Hit

On Friday, the Dow hit yet another one of our upside projections. This continues the longest stretch of successful upside targets since I started forecasting them 20 years ago. When the bear market ended in 2009 I remember being on CNBC with Larry Kudlow in early March thinking that stocks could bounce 1000 points before a possible retest of the lows could set up. People thought that was nuts. When stocks exceeded 8500 for five straight days, 10,500 became the next target and that was, of course, laughed at.

And here we are today. Dow 28,000. A target I offered on Fox Business, Yahoo and CNBC more times than I can count. Five straight closes above 28,000 will open 30,000 as the next target. I remember first discussing Dow 30,000 when stocks first breached 20,000 and people thought I was crazy. Interestingly, at this point, there isn’t another number above 30,000 to target. I am not sure what that means, but we will cross that bridge when we get there.

With Dow 28,000 I am seeing more people become bullish and a few cracks developing in the market with the number of stocks making new highs and new lows on the same day. Smart money is really increasing their level of quietly selling and dumb money is pouring into stocks. That’s usually not a recipe for good risk/reward and I am sticking with my neutral position in the very short-term. Simply put, that means I am not committing new money or raising risk until either stocks soften or the market internals improve. I am not calling for an end to this rally or the bull market or anything significant on the downside. Just your routine mild pullback or sideways action. I am, however, beginning to think about 2020, recession and how a bear market could develop.

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Lots of Opps But Market Not Ready For Another Leg Just Yet

Today is options expiration where moves used to be wide and volatile. However, these days expiration has actually become a fairly tame affair. As I wrote about the “haves” and “have nots” in the indices the other day, I think today will shape up to be fairly quiet with an obvious bias to the upside as the bears have been thwarted multiple times this week. Stocks should jump to fresh, new highs this morning but I do not expect an acceleration from there. The Dow, NASDAQ 100 and S&P 500 continue to lead while the S&P 400 and Russell 2000 are trying to play catch up and eventually take over leadership for the run past 28,000.

While I have been an unabashed bull for many quarters in semis, I think there is an opportunity in communication services, the newer S&P 500 sector. Banks and financial also look good to me for more upside. I am not sure today is the day to buy transports, but before long, they should be ready for an all out assault on all-time highs.

Some pundits have started to cry foul regarding the NYSE Advance/Decline Line’s inability to score new highs lately while stocks have marched higher. I am not worried about that just yet. However, I remain in the neutral camp over the very short-term for the same reasons I have spelled out lately. Stocks may only see a few percent lower or just go sideways for a few weeks before the next upside assault begins. Either way, I think there is time.

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Bulls Recharging. Bears Turning into Bulls

It’s good to be home after a great but quick trip to Dallas. Uncharacteristically, the markets were fairly quiet on Monday and Tuesday while I was away. Usually, my travels bring about all kinds of fireworks which force me to change plans and stress about being available and not missing an opportunity. I hope that doesn’t mean that the next trip will be worse than normal to make up for it!

Since I turned neutral on the very short-term, stocks have a done a beautiful job of doing, well, nothing. The “haves”, Dow, S&P 500 and NASDAQ 100 are doing a really nice job of going sideways which was one of my scenarios. The “have nots”, S&P 400 and Russell 2000 have done a nice job of mildly pulling back which was my other scenario. Nothing really has changed. The great growth/value debate rages on with growth bouncing slightly relative to value over the past week.

Semis look strong. Banks are readying themselves for another assault higher. Discretionary may have ceded leadership but it still behaves well. Transports are a little weaker than banks, but also look like they want to surge into year-end. Junk bonds do not behave like they have peaked. Industrials and materials have quiet caught fire as value has become back in Vogue. Healthcare and biotech are very strong. Energy remains in the doghouse.

All in all, I am seeing no signs that the rally has peaked or is about to end. My next upside target of Dow 28,000 should be seen by year-end with 30,000 possible shortly thereafter. I do find it hilarious that so many pundits have revised their bearish history by calling for Dow 30,000 or something similar when they have been neutral or negative for years. One negative I will leave with is just that. A lot of folks have turned positive after stocks eclipsed new highs recently. That’s cause for concern.

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The Neutral Theme Continues

Greetings from Dallas where I am attending NAAIM’s annual Outlook conference with the real thought leaders in the industry. Although I have been involved with NAAIM for almost 30 years, I still get excited and look forward to seeing old friends, meeting new ones and hearing from and participating with true cutting edge thinkers who aren’t beholden to Wall Street’s agenda.

So, here we are. Although my intermediate and long-term bullish outlook remains unchanged and emboldened, I remain neutral over the very short-term as I first mentioned last week when I turned in real time, right here. Where do I think the major stock market indices can pull back to? As I discussed last week HERE, I am not looking for anything significant on the downside, maybe a few percent here or there. And perhaps the bulls can just limit the downside to some sideways activity within a few percent band for a period of time.

While I am still very positive on semiconductors, banks and transports, other sectors are percolating and starting to lead equally as good. Communication services being among them. Don’t underestimate the importance of this development for the continuation of the rally. On the flip side, I have been bullish on the defensive sectors like utilities , staples and REITs and they seem to have peaked for now. Reducing those positions into strength seems like the correct strategy for the time being.

I am going to cut it off here so I can hear Doug Ramsey from the Leuthold Group offer his long-term bearish case, something I don’t agree with, but I am certainly open to other opinions. If nothing else, it helps me to solidify my own position or find holes in it.

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Pause to Refresh or Mild Pullback Underway

Earlier this week, I turned neutral for the short-term in the stock market. That’s all it is. Neutral when I look out a few days to a few weeks. I am not calling for any decline of significance and we may not even see a noticeable pullback. Stocks could go sideways to work off what I see as investors becoming a little too giddy or they could mildly pull back. My work doesn’t support much more than that. Of course, as always, I could be dead wrong and stocks soar from here. I don’t see that happening just yet.

When looking for logical (when it the market ever logical?) areas for a pullback, I direct you to the horizontal blue lines on the Dow, S&P 500 and NASDAQ 100 below. If we get some mild weakness, I am just looking at what probably too many other people are looking at.

Finally for today, the Dow Transports are getting a lot of attention because after more than a year of not confirming the positive action in the Dow Industrials, they are both trying to score fresh, all-time highs. While yesterday’s assault attempt was thwarted by the bears, I think the transports are close to breaking out and soaring further into January. More on this next week.

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Dow Joins Party. Stocks a Bit Tired

Greetings from 36,000 feet on some bumpy air, which is the norm when I fly. On Monday, the Dow Industrials joined the S&P 500 and NASDAQ 100 in fresh, all-time high territory. That’s now three of the five major stock market indices which have accommodated my bullish forecast. The last two, S&P 400 and Russell 2000 still have a ways to go, but I am still very optimistic that they will join their cousins later this quarter or by early 2020. Both lagging indices are behaving constructively with solid foundations to launch higher. Here are the midcaps below.

With all that said and the endless patting myself on the back for being so bullish, I do not believe adding new money nor getting more aggressive is the right play here. I think there is a decent chance that stocks are peaking in the short-term and will either mildly pull back or move sideways for a spell. I continue to believe that any and all weakness is a buying opportunity until proven otherwise.

 

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More New Highs Coming. The Celebration Continues.

Right on cue, the NASDAQ 100 followed the S&P 500 into all-time high territory. And before you ask, I still believe the Dow, S&P 400 and Russell 2000 will be there shortly. Not a single note of my tune has changed. The bull market remains alive and well and higher prices are a comin’. Of course, you wouldn’t know this from listening to the chorus of bears who remain firm that Armageddon is just around the corner.

Taking a quick at some the things that really matter, we find my four key sectors are in good shape. Semis have fully broken out and are running strong. Banks are on the verge of their breakout and that should be happening this month. While discretionary has been quiet, I think they too will see new highs before Christmas. Finally, transports are behaving constructively and I expect higher prices into year-end.

High yield bonds have been very slowly plodding higher without much attention. Their behavior remains very supportive of a growing economy and continuation of the bull market, no matter how the bears want to spin it.

My theme is unchanged. Any and all weakness is a buying opportunity until proven otherwise. The masses have hated and disavowed this bull market each and every step of the way. Until we see the majority of very wrong bears turn positive, this market will continue to rise.

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