Stocks Growing Tired

With the major indices going vertical since October 9, I am starting to see some signs of tiring. “Tiring” is a lot different than forecasting a full fledged correction or even a deep pullback. It just means that the odds favor either some sideways action to help restart the engine or some sort of mild price decline to shake out the Johnny Come Latelys.

During this rally, we saw the S&P 500, S&P 400 and Russell 2000 hit all time highs with the NASDAQ at its highest levels since 2000. The Dow has been the laggard index, but I do expect that to get in gear after this pullback and also see new highs.

Gold has cooperated nicely from the recent bullish call and I think more upside is ahead for the shiny metal. As I have discussed all year, especially of late, this is the bond market rally I have been waiting for. The train began to leave the station in late August and September and is now in full motion. Treasuries, quality corporates and government bonds all look higher, especially if they see the slightest bit of weakness first. Our clients have owned high yield bonds for some time and that rally has been the strongest so far and may be growing a bit tired itself.

The US dollar has been under pressure for almost four months and it looks like a major bottom is about to be formed this quarter. My long, long-term view remains very, very positive for the greenback. Uncharacteristically, energy has been hit hard even though we have seen dollar weakness. That indicates strong selling beneath the surface with even lower prices to come.

I am about to start working on a Canaries in the Coal Mine update and I hope to post it on Friday.

Bernanke’s Worry Lines & CNBC’s Closing Bell

I will on CNBC’s Closing Bell today, Friday, at 4:00pm discussing the lack of any taper from the Fed, what they see that the masses don’t and where the markets are ahead.

Earlier this week in Street$marts (click on link to see) and on my blog, www.investfortomorrowblog.com I spelled out the three scenarios that could result from the Fed meeting. While I did not believe any taper was warranted, the market was expecting a token $10-$15 billion. When Bernanke & Company did nothing, risk assets soared, almost as if the heroine addict was given a reprieve from going to rehab.

In my view, the Fed clearly sees something that the masses do not and I have long argued that the markets and economy cannot stand on their own two feet without support. With Janet Yellen (thankfully) seemingly a shoe in to succeed Bernanke, it will be interesting to see if the Fed even tapers at all before she takes office in January.

The Fed’s lack of stimulus reduction does little to change my intermediate-term outlook. It does not make me any more bullish than I already am. I continue to believe that after the next pullback which I expect over the coming 4-8 weeks, stocks should rocket to fresh all time highs well north of 16,000 during the first quarter of 2014.

Regarding bonds as I have written about before, I was waiting for the taper to signal an all clear to buy bonds because negative sentiment had risen to record levels. Anyone even thinking about selling would have done so. It would have been the classic case of the selling the rumor and buying the news. While I am still positive on bonds over the intermediate-term, my conviction is not as high as it would have been had the Fed cut back its purchases.

Bonds are in a bottoming process that should lead to a significant rally sooner than later.

The dollar finally breached its June low which I have been patiently waiting for. I remain (as I have since March 2008) very positive, long-term on the greenback. While it may not be rosy in the U.S., it’s still the best house in a bad neighborhood. I fully expect the dollar to bottom by Thanksgiving and embark on the next leg of a secular (long-term) bull market.

At the same time, that should mean a tailwind for energy prices this fall followed by a significant decline over winter.

Finally, today is the Dow Jones rebalance of Alcoa, Bank of America and Hewlitt being removed and Nike, Goldman and Visa being added. It doesn’t involve a lot of money, but I continue to find it “curious”.

Have a great weekend!

In CT, it’s fall country fair time, apple picking, softball and tee ball for my kids and a celebratory dinner for my closest friend on Saturday. With rain in the forecast for Sunday, I hope to get some TV time with the NFL and season ending golf tournament from East Lake in Atlanta.

Bull Market Run to Continue

Stocks have a done a good job over the past few weeks of shrugging off the events in Syria, the uncertainty at the Fed and the less than stellar economic news. It doesn’t “feel” like the two month consolidation is over and Dow 16,000 is right around the corner, but we will let the market tell us. I do continue to believe that more all time highs are ahead in the fourth quarter and into 2014.

Here is my most recent segment on Fox Business where I discuss a forecast and my favorite sectors.

http://video.foxbusiness.com/v/2630224224001/will-the-bull-market-continue-to-run/

While stocks are bouncing back nicely from the August lows, the bond market simply cannot get off the mat. Given the underwhelming economic news which should have led to a rally, the bond market is fixated on the Fed meeting next week. With the extreme level of negative sentiment, my first reaction to any announcement of tapering by the Fed will be to buy bonds. More on this later…

Big Correction Coming?

Stocks continue to trade very heavy, but we should be on guard for a strong bounce at any time here. I think the top is in for a while so bounces are now selling opps and a better buy point should be seen after Labor Day. To reiterate what I have said for a while, this pullback should not be the beginning of a new bear market, just another healthy cleanse in an aging bull market.

Here is the segment I did on CNBC’s Squawk on the Street the other day sharing my thoughts.

http://video.cnbc.com/gallery/?video=3000191113&play=1

Short-term comment:

It’s been amazing how fast the NYSE Advance/Decline line has plummeted from its recent all time highs. Coupled with the spike in new 52 week lows, you can really see some widespread selling, especially in the interest rate sensitive issues. Even if rates rise for the next 30 years, it won’t be a straight line and there will be some powerful countertrend rallies. Bonds could be the story for the last four months of 2013, but not in the manner everyone thinks!

CNBC and Fox Business This Week

I am going to be on CNBC’s Squawk on the Street on June 24 at 10am and Fox Business’ Markets Now on June 25 at 1pm.

Going out on a limb that the bond market just bottomed and is about to begin a meaningful rally. Bond proxies and like stock sectors to follow. Telecom, utilities, etc.

Volatility should be here for a while but that’s no reason to go hide in a bunker!