Technically speaking, the biggest concern right now is the recent decline in breadth. Near the end of January better than 85% of stocks in the S&P 500 were above their respective 50 day moving averages. Now just over 65% of S&P members are above their 50-day moving average.
Too often investors play the ball and not the whistle. They have an idea of what SHOULD happen but fail to see what IS happening and do not listen to the ultimate referee for investing—the market. If you believe we are heading into a bear market and/or recession and yet the market continues to hit new 52-week highs and the ISM Manufacturing Index remains north of 50 in expansionary territory, how long will you wait before the whistle blows?
I wanted to discuss some technical relationships I’m starting to see in the market that might shed some light on recent events. The goal is to help us identify corrections and rotations in the market between various assets classes and stock sectors.
The cyclical sectors of the market have been weakening over the last few weeks which was warning of the possibility for a pullback. However, the cyclical sectors are leading the way today after bullish commentary from the world’s two biggest central banks.
It has been apparent for years that the state of the Chinese economy has a major impact on global markets. If the headline number on Chinese growth is stronger than expected that is generally viewed as good for us here in the States. If growth is slowing in China then that is going to have a negative ripple effect on the global economy.
Gold has gone nowhere since peaking near $2,000 an ounce back in 2011 and with the recent slide this month many gold investors are questioning their resolve. I’d like to look at gold from multiple points of view and identify some lines in the sand which will hopefully allow investors to make some informed decisions.
St. Louis Fed President James Bullard tells CNBC that his "main message" for viewers is that the Fed's policy is "very easy and it's going to stay easy for a long time."
A correction is finally upon us. Traders have been holding their breath for weeks and can finally exhale. Portfolio managers holding onto 10 to 20% in cash while the market rose are probably feeling itchy on the trigger to put that money to work, as performance anxiety sets in.
The cyclical sectors of the market have been weakening over the last few weeks while defensive sectors have strengthened, a sign of sector rotation that typically occurs prior to market tops. Additionally, there were a few canaries in the coal mine beginning to sing as highlighted two weeks ago that suggested a short term top was in the making.