Market Briefing For Tuesday, Jan. 16
The stock market has no fire safety override; and continues up as I've discussed by video. Clearly, the S&P is now (at last) becoming jammed overbought, with the massive upside spree that is (or should be) unsustainable as it pushes over 2800 perhaps.
Now we aren't going to delve into Presidential gaffes, or setbacks presumed regarding the almost-done Immigration Bill; and anticipate that there will be some compromise to keep the Government running. However it's amusing that everyone assumes that's a 'given' with respect to the new week. That better be the case. When everyone is on the 'long' side of the ledger and capitulated to the 'new paradigm' nothing can go wrong idea; that's when it actually becomes a more dangerous spot. |
Daily action not only finished the New Year's second trading week with another 200 point Dow rally but it was the strongest rally of the week just in Dow points (not breadth); and the third 200 point Dow rally of this year. How is this conceivable? Primarily because of rotation into industrial older companies that are perceived to benefit from serious economic growth, as well as Oil and related Energy strength plus rebounds in FANG stocks, but not all of them of course (as Facebook which we have questioned for quite awhile, got shellacked on returning to their roots, which is a good thing for the service in the long run but near-term negatively impacts profits a bit). So we certainly have not had the preferred pattern of a shakeout this week and that's too bad. Not for our ideal pattern evolution (which would still look for higher prices based on seasonal fund flows as the winter and spring do unfold); but because 'not' having a correction is actually a riskier pattern. To wit, a failure to 'regress to the mean' (retreat to the moving average or a pause of some minor nature) instead means they've constructed a bullish bias that is ludicrous in terms of some of the rationales or even downright riskier from a technical perspective. But, as I've said, technicals have been overbought and extended, but 'not jammed' in a 'ducks-a-row' manner that would scream blow-off top. We do not quite have that; but risks of this becoming that are enhanced in a sense by virtue of a straight up move of the Averages. The 'chase is on', more or less describes what's going on. It is characteristic of a paradigm shift to a truly bullish environment, rather than one merely propagated by a persistently accommodative central bank monetary policy.
The guidance has been to allow for a pause (to refresh more or less; since I still saw more upside from retirement fund flows seasonally at least). We have not had that pause which means more are lined up on the bullish side of the ledger. The fund flows can assist the persistence of it all. However, the extension (essentially running this up the flagpole and not yet really building a pennant) needs to either blend into a plateau, or risks increase by simply going parabolic, and waiting for the market to snap. |
Saturday (weekend final) MarketCast |