Cyclical stocks, as tracked by the Morgan Stanley Cyclical Index, have been handily moving up relative to the S&P 500; investors think there is no chance of recession anytime soon. Sorry ECRI; no one believes you right now. Speaking of cyclical stocks, Caterpillar (the single most watched cyclical stock) reports earnings Monday and that company may influence the market next week.
FROM A TRADER BOARD
I saw some comments at a
trader board stating that the rally since Nov 16th is now 54 trading days long.
Going back to 1991, there have only been 11 rallies longer without a 5% or
greater correction (we only got 3% last month). The Relative Strength Indicator,
a technical indicator tracking price movement, has only been higher 4 times in
the past 12 years. If the S&P 500
makes it to 1520 next week, it would be a level that has only been reached 3 other
times in the past 12 years. In other
words, we’re due for a pullback.
The author noted that parabolic
upward runs fall even faster. From
my perspective, this run up has been awfully fast and has the look of a
top. Technically though, Sentiment is
not overly bullish. By my indicator, Sentiment
was slightly below 50%-bulls as of yesterdays close and that is solidly in
neutral territory. I don’t see a
parabolic move either – the S&P 500 is hugging the upper trend line and
that is straight.
MARKET INTERNALS
The 10-day moving average of
the number of stocks advancing is dropping slightly; new-high vs. new-lows are
flattening out, based on several moving averages of different lengths.
Looking at the last 10-trading
days there have only been 2-days that were down. I certainly wouldn’t be surprised to see a 5%
move back to the lower trend line, but there is nothing to panic about at this
point.
ICI MUTUAL FUND INFLOWS – IS THERE A CORRECTION COMING?
Long-term domestic Mutual funds have reported inflows recently for the weeks of
9 January and 16 January. Believe it or
not, there have only been about 15-weeks of inflows in these funds over the
last 2-years. Every time there have been
inflows, the market has topped out within 2 to 6-months and a correction has
followed. We can find a lot of evidence
of a topping process underway. Whether
this foretells a correction or something more is anybody’s guess.
MARKET RECAP
Friday, the
S&P 500 was up 0.5% to 1503 (rounded).
VIX rose about 1.6%, to 12.89.
NTSM
The NTSM analysis
remained HOLD Friday. (All indicators
are neutral.)
MY INVESTED
POSITION
Based on a BUY
signal 7 of 9-days, and more importantly, consecutive closes above the prior
high of 1466, I moved into the stock market at 1471 on the S&P 500 on 14
January. I am currently invested in a
range of near 50% invested in stocks.
