Market Overview

The Market Has Spoken!

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The market cast its vote last week with all three of the major indexes up for the week, although on lighter volume. The NASDAQ was up +1.4%, the S&P 500 Index was up +0.6% and the Dow Jones Industrials, +0.3%. The kind of market action that we have been getting these last four weeks and particularly the last two confirming weeks shows that the bull market is once again in action. The last year and a half has been one that has left many with a sour taste in their mouth with little upside and two major downturns in the market in August 2015 and the first two weeks of January. The rest of the time the market has been in a long narrow trading range that was grinding down even the best of investors. Even the so called smart money, Hedge Funds, have seen record losses trying to navigate through this market the last year and half. Many firms have also closed up shop. Why? It is very difficult to make money in a trendless market. Yes, I know that there were some trends out there that were defensive but, let's face it, most people get into the market to make money and very few are going to get rich investing in utilities and bonds. That's why so many were running to gold and silver.

So what is the trend now? Well, as of this writing, it is up and since we only look out as far as our head lights shine, we have to go with what is and, that is "follow the trend until it bends". Remember "the trend is your friend" and whether it is up or down you can make money but, it is very difficult to do so when there is no real trend in the long term and you get whipped back and forth by short term trends within a sideways base. That is not an investors market. That is a traders market and only for the most qualified.

We have broken out of that base which had resistance on the S&P 500 Index at around 2132-2135. We are about 40 points above that at 2175. That is perfect and, should hopefully be enough distance away from 2135 to allow some mending to be done and give time for the cement to dry so that the 2132-2135 range will now be the new support level when we have the pullback that is coming shortly.

Some additional good news is that commodities and bonds are also in positive trends and continue to find buyers. Gold & Silver did see some selling last week but, that is not unusual considering how much they have run up recently. This being the case, we may have more than stocks to look to for growth.

It definitely looks like the economy is picking up. Stocks like IBM and Microsoft, once considered burned out stars, are getting a bid in the market. Institutional money, banks, brokerage firms, pension money and mutual funds are putting money to work again. Fundamentally, buyers in the market are paying higher stock prices on "price to earnings ratios" than normally. In other words, the market is not cheap. First time jobless claims came in better than expected last week, along with existing home sales for June. Thing are looking up again but, week we again have the Federal Reserve meeting on Tuesday and Wednesday. No rate hike is expected but, any time the Fed speaks it seems like the market can get a little nervous. The behemoth Apple reports earnings on Tuesday. Apple was said, at one time, to have led the previous bull market. If Apple were to come out with a big miss or come in way above its numbers it may move the market either up or down. Let's not forget Facebook on Wednesday and Amazon on Thursday. Next week is as busy as it gets in earnings season.

The reality is, even though the market is back on the right track, it is overbought. In a bull market it can stay overbought for some time but expect a pull back, "the pause that refreshes". Even though the recent move was on low volume and even though volume is the fuel for the fire, I believe the worse is over and we are starting a new bull market. The Central Banks around the world have also cast their votes for a bull market and they are going to make sure that happens.

Posted-In: Markets


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