On Borrowed Time

On Borrowed Time

I can’t get these two charts out of my head: Minor new highs for the S&P 500 on weaker relative strength and waning momentum… and lower highs for the broader NYSE Primary Exchange Index of over 3,000 stocks, again with weaker relative strength and waning momentum. Intel and Google reported this week and their stocks plunged. 3M also recently reported weaker than expected results in Q1 2019 and MMM shares have already dropped -15%. This kind of market behaviour does not tend to happen during bull markets. I continue to believe the stock market is running out of steam and is on borrowed time.

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Patience is the Name of the Game

Patience is the Name of the Game

The recent surge higher in stock markets feels powerful. Are the bulls back in control? For now they are, yet stock markets have just returned to the underside of the longer-term trend channels that had provided support for the bull market all the way back since 2009. A re-test of the upper trend line is a very common occurrence. What happens next is all important. If stock markets can power through overhead resistance and overbought conditions and go on to make new highs, then the bull market continues. If the rally ends here and reverses, markets could be in trouble. We just have to wait and see what happens. Patience is the name of the game.

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Waiting Game

Waiting Game

Following the December plunge in the stock market, we are experiencing a sharp oversold rally, which is now running into resistance overhead. The longer-term 50 week moving average is turning down and should cap the advance from here. What happens next is all important. Is this a bear-market rally that has run its course, or the start of the next leg higher in an ongoing 10-year bull market? We will find out shortly.

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Oversold Rally

Oversold Rally

We have had the sharp correction,. Now it is time for stock markets to rally. I am watching closely to see how far they can juice the market higher before heading into trouble. The relative strength and momentum indicators are oversold but still in a sharp downtrend. My guess is that stock markets need to re-test the lows at a minimum before a more sustained rally can commence. Today is options expiration in the United States, so often prices can get manipulated in the short-term. The next few weeks should provide meaningful information as to the health of the stock market.

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Bouncing From Oversold

Bouncing From Oversold

Following the sharp break lower in October, stock markets are now bouncing from an oversold position. The NYSE Index lost -11% in October, so a relief rally is overdue in the short-term. A lot of damage has been done to the technical picture, however, following the recent sharp decline and it is likely now that a multi-year bear market has begun. Stock markets would need to recover quickly to negate this view. If we are now in a bear market, rallies should be sold rather than dips bought.

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