And FINALLY, the Dow Rings the Bell

Well folks, with the Dow Industrials finally scoring fresh all-time highs, we have every major stock market index plus all four key sectors seeing new highs since the bottom of the Q1 correction. My forecast is now complete. I can’t count how many times people told me that a new bear market started or this time I was going to fall flat on my face. Don’t get me wrong. I fall on my face plenty times. I just keep getting up.

As the Dow has raced higher this week, the market’s foundation has continued to weaken. There’s nothing new on that front, only that the split market with so many stocks making new highs and new lows has worsened. It’s not healthy. That doesn’t mean the bull market is over because I don’t think that’s the case. I do think stocks are in for a pullback.

If we do see a pullback, the most telling thing may be how the defensive sectors behave. Right now, utilities, staples and REITs could go either way. High yield bonds have been quietly strong but no stronger than many floating rate or levered loan funds. The rest of the bond market has struggled. While the NYSE A/D Line has been powerful all year, it’s been lagging on a short-term basis all month.

Finally, and most importantly, price has yet to trigger any indication of impending weakness. That’s what I will be looking for over the coming week or so to take action.

If you would like to be notified by email when a new post is made here, please sign up HERE

Buy Yom Kippur But Participation is Waning

As the Jewish holiday of Yom Kippur is here, so ends the seasonal trend of selling Rosh Hashanah and buying Yom Kippur. It worked out very well this year, if you did the exact opposite! Rosh Hashanah was the most recent little low and stocks quietly rallied right through to Yom Kippur.

The Dow Industrials and the S&P 500 have reasserted themselves while the Russell 2000 and NASDAQ 100 have lagged, not exactly the healthiest backdrop. In sector land, banks continue to be weak and tiny bit concerning, especially when bond yields have rallied which is usually a tailwind.

High yield bonds have behaved reasonably well but the NYSE A/D Line has finally started to show some signs of deterioration and weakness. This condition can persist and not matter for three months or 23 months. It’s not a timely indicator, but it is very important.

Even though stocks have rallied of late, the internals have not kept pace, let alone lead. The short-term concern I have been writing about remains in place.

If you would like to be notified by email when a new post is made here, please sign up HERE

Hindenburg, Titanic, OH MY!

As I did my usual weekend research and overview I am even more convinced that there is valid reason to have some short-term concern. By short-term, I am looking at the next three to five weeks and nothing more than a single digit pullback, worst case. Lots of little things have ans continue to pop up to go along with the negative seasonal headwind this time of year. However, the real and nasty bearishness of September has been muted by the bull market as I wrote here.

While price action in the major indices continues to be strong and price is the final arbiter, there are a number of secondary things that warrant attention. You have heard or read about the “dreaded” Hindenburg Omen or Titanic Syndrome. Those are two stupid names for a market condition that’s not as deadly as the name suggests. In essence, they are triggered when there is a split market, meaning lots of stocks making new highs and new lows along with a few other rules. Analysts look for clusters of these signals to signal weakness in stocks. While their track record is a little above average people love to cherry pick and highlight triggers at the bull market peaks of 2000 and 2007.

Given what I wrote, I still remain very confident that the bull market remains alive and reasonable healthy. More all-time highs should be in order next quarter and into 2019.

If you would like to be notified by email when a new post is made here, please sign up HERE

Gold a Bit Perplexing. Stocks Due for Pullback

Let’s start with gold. A few weeks ago, I wrote a longer article in Street$marts about a major low in gold forming. It’s USUALLY not that difficult to spot. However, this time, gold and the gold stocks have been diverging with the metal holding the bottom while the stocks made new lows. See the charts below.

I can tell you that it’s  been a bit perplexing, but not unprecedented. And although I have been long-term bullish on the dollar since Q1 2008, I now find myself in one of those moments where the next month or two doesn’t look so hot for the greenback. If that comes to fruition, gold should rally.

Turning to stocks, I still have the same concern I voiced the other day. Price acts great, but I am not in love with what’s going on beneath the surface. There is no clear cut leader from the major indices. Discretionary and transports are leading powerfully. Semis are neutral at best. Banks are no better. Junk bonds have been quietly very good. The NYSE A/D Line has stalled out.

What would make me feel better?

The Dow joining the other indices and scoring an all-time high. The NYSE A/D Line joining the Dow. Banks stepping up or at least outperforming the S&P 500.

I am not overly negative or worried about a big decline, but I also don’t think stocks are rocketing higher from here. A pullback sooner than later seems in order.

If you would like to be notified by email when a new post is made here, please sign up HERE

Becoming a Little Concerned

Sell Rosh Hashanah, buy Yom Kippur. The age old stock market adage for this time of year. I can tell you that no one was discussing that at synagogue over the past two days. As you can imagine, it was AAT, all about Trump, the good, the bad, the ugly and the otherwise. Normally, as you know, I would insert myself right into the conversation. However, given the holiday and toxic nature of politics right now, why bother. Everyone has their opinion and no debate is likely to change that.

Stocks saw reversals on Monday and again on Tuesday, first to the downside and then to the upside. Net, net, we saw a small rally. Leadership is faltering. Semis and banks are breaking down. Dow Jones Transports scored an all-time high while the Dow Industrials did not. The horribly named Hindenburg Omen and Titanic Syndrome have been flashing repeatedly this month, signaling a narrowing of participation.

I am becoming a little more than mildly concerned.

And gold is certainly frustrating bulls and bears.

If you would like to be notified by email when a new post is made here, please sign up HERE

Role Reversal

The NASDAQ 100 and by default, the technology sector has led the markets all year. That’s certainly no secret. Value stocks have lagged not only this year, but every year since the bull market began. In fact, they are about as cheap relative to growth as they have ever been. This week, there has been somewhat of a reversal of fortunes as the tech-laden NASDAQ 100 has come under strong selling pressure while value stocks have held their own.

Does that sound familiar?

That’ s what started to happen as the Dotcom Bubble began to burst in March 2000. No, I am not predicting anything like 2000-2002, just making an observation. The market’s foundation remains very solid today while it was crumbling in early 2000.

Although semis are selling off with tech, the other three key sectors remain in leadership. Junk bonds are fine and the NYSE A/D Line recently scored yet another all-time high. Definitely not the behavior typically seen at the end of a bull market.

It’s interesting that as the bears beat their chests on every bit of geopolitical news that comes out, especially when concerning Donald Trump, stocks don’t even miss a beat. As I have said since Trump was elected, the market simply does not care about his tweets, attacks, behavior or anything else that’s not related to the economy. It’s reality over rhetoric or policy over personality. That has to be so tough for the bears to accept when all they have done is rationalize why stocks should be going down for the past 9 years.

Finally, while the gold stocks have made new lows this week, the metal has not, creating an interesting divergence…

If you would like to be notified by email when a new post is made here, please sign up HERE

Record Highs in Stocks, Record Economic Output, Record Corporate Profits

And the beat goes on. I know stocks must be close to a pause because one of my market buddies asked me if stocks will ever go down again. Of course, he was kidding, but he and I ask each other idiotic questions from time to time during very strong trends. Stocks remain strong. That’s inarguable.

Index leadership is excellent. Same for sector leadership. Sure, the banks could step up a little more and they probably will when bond yields go up for more than a few days. Junk bonds are at all-time highs as is the NYSE A/D Line. Gold reversed lower on Tuesday so this could be the real test for the bulls to put up an important fight.

This morning the government revised Q2 GDP to +4.2% from 4.1% which doesn’t mean much except that Q2 was very nice, while consumer confidence is about as high as it ever gets. People feel good about the economy and they should, for now.Q3 won’t be so easy and my recession watch begins a year from now through the 2020 election.

As I am typing this, I am arguing with someone on Facebook about how good the economy is. Besides clearly hating Trump, his feeling is that the economy is not so strong because of the income equality gap and the economy could collapse if Trump’s supposed legal troubles increase.

I flat out dismiss this. It’s pure nonsense.

If Trump left tomorrow, what economic policy would change? MAYBE the tariffs would slowly go away which would be an economic boost not hindrance. Tax reform and reduced regulations wouldn’t change at all. The country is way too concerned with give credit or blame to the person residing in the White House. Long-time readers know that I prefer to say things like the president presided over a recession rather than caused a recession. One person can only do so much.

Anyway, we have record highs in stocks, record economic output (GDP), record corporate profits, etc. No matter which side of the aisle you sit on, things are pretty darn good right now, of course, completely ignoring our national debt.

If you would like to be notified by email when a new post is made here, please sign up HERE

Beware of the Rally. “EVERYONE” is in The Hamptons

Early indications are for more new highs in the stock market today as the S&P 500, S&P 400, Russell 2000 and NASDAQ 100 look to see blue skies when stocks open. This comes as no surprise since I have been writing about new highs coming all along, but especially after the Q1 correction which is now a distant memory. I still expect the Dow Industrials to join the part in all-time high territory before long.

When I look at the order of leadership, I see a very healthy lineup of NASDAQ 100, Russell 2000, S&P 400, S&P 500 and Dow Industrials. That’s typically what we see during the strongest bull moves although I continue to believe that stocks aren’t quite ready for the next blast off. They still look to be grinding higher as I wrote on Friday. In this regard, I would be happy to say I got it dead wrong.

Sector leadership looks good and getting much better with discretionary securely in front with transports just behind. Semis and banks are stepping up. If these two can break out to new highs, that could start a melt up into year-end for stocks.

With this being the final week of what we call summer, volume could be on the very light side and I would expect the pundits to question any significant move. Don’t be fooled by this analysis as it hasn’t worked at all this century. Our kids start school this week and most others have either already started or will start shortly. The whole notion of “everyone” being in The Hamptons is such nonsense.

Let’s see how stocks close today. I would have thought that a pause was coming, but I don’t have strong conviction. Gold continues to bounce hard but I still don’t think we saw THE bottom.

If you would like to be notified by email when a new post is made here, please sign up HERE

Lots of New Highs as the Grinding Continues

After some fresh all-time highs in the S&P 500, S&P 400 and Russell 2000, stocks have been resting although the path of least resistance is higher, more in grinding fashion than explosive. Index leadership is good. Sector leadership isn’t bad. Junk bonds have defied my forecast that they saw their bull market peak 8 months ago and powered ahead to score a fresh, all-time high. Score another positive for the bulls.

The all-important NYSE A/D Line continues to make new, all-time highs, showing that the bull market continues to have widespread participation.

In short, bull markets do not end with this kind of underlying strength and weakness should be bought.

Finally, I have written about watching gold for signs of a low and while there was a small bottom last week, I do think the real bottom is in front of us. Gold, the metal, as you can see below, looks better than the gold and silver mining stocks. Usually, it’s the opposite at a bottom. We shall see what next week brings.

If you would like to be notified by email when a new post is made here, please sign up HERE

Manafort, Cohen Guilty but Reality over Rhetoric

On Tuesday the S&P 400 and Russell 2000 hit fresh all-time highs although without strong conviction. The three indices are not far behind although the Dow may take a little longer. All is good on that front. Banks are perking up and as I mentioned the other day, the semis look to have bottomed. Discretionary hit an all time high as did the transports in somewhat of a quiet surprise. All is good on the sector front for the most part.

Junk bonds have really stepped up although few have noticed and the NYSE A/D Line is making all-time highs. Things are pretty good from purely a market perspective.

You wouldn’t think that by watching the headlines of the president’s former campaign manager being convicted and his former personal lawyer agreeing to a plea bargain with the government. For almost 20 months I have said to focus on reality over rhetoric. The markets simply do not care about the non-economic nonsense going on in DC. Unlike what was going on with Nixon, the country exudes confidence. End of story.

Oh yeah, the bull market is now the longest in history if you listen to the media today. What does that even mean? Does it really matter? Of course not. More on this topic in Street$marts.

Stocks are grinding higher but they still do not seem ready to blast off again. That day will come.

Gold is rallying but I still think there is one more decline coming before the real rally begins.

If you would like to be notified by email when a new post is made here, please sign up HERE