Bull, Bear, Bull

 

Let’s get right down to it: A quick look at some indicators that may offer guidance to the markets direction.

Near-term technicals

My notations on the chart below should be fairly self-explanatory. In a nutshell: It might be expected that we see a continuation of the bounce we saw Monday and Tuesday of this week, perhaps taking us back to the double bottom neckline around 1990 for the S&P500. Evidence of hooking RSI and Stochastics, along with a spinning top candle on Monday add to that potential. But that level may not hold out for too long.

S&P nearterm

 

Mid termed technicals

 

It looks like the market will find a reason to fall after a near termed uptick – per the short termed indicators noted above. In a nutshell:

  • Moneyflow, from both a cumulative perspective (bottom pane) and its momentum (top pane) of the chart above  is poor.
  • MACD is just plain ugly. Note that the last correction in the summer where we saw a spinning top and momentum setup – MACD was diverging positively. NOT THIS TIME!!!
  • Volume has declined on recent peaks, risen on recent rallies. That means selling pressure outweighs buying pressure.
  • Breadth looks terrible, except from an oversold perspective. Here’s the blog with my  breadth charts.
  • Sentiment has actually turned to become a bit more bullish since my update on the blog noted above. Smart money is buying (65% bullish) , dumb money is selling (38% bullish). This is up from dead-even 50% on both sides a week ago. Chart below, courtesy of www.sentimentrader.com. However, smart money sometimes catches over-reactions for the trade – which can be a short termed signal – not so good for the longer term.

Smart dumb jan 13 $

  • Trailing PE ratio on the S&P500 (OK—not a technical indicator, but what the heck…) is at the top of its range. A correction is probably warranted. Chart courtesy http://www.multpl.com/

 

pe

Long termed technicals

dow 100 hyper

It is clear that the US markets have broken into a secular bull phase – given the end of the secular sideways period ending in August 2103. In a nutshell:

 

  • The chart above (courtesy www.freestockcharts.com) suggests that, were secular trend patterns to continue, we should be in a bull market for at least 2020. Bull markets have ranged from 7-17 years in length since 1880. The 2013 breakout suggests a minimum bull leg out to 2020. I have a longer chart in my book Sideways that will illustrate the secular bull/bear patterns back to 1880.
  • Rising rates are actually good for the markets. Here is a blog I wrote on that topic.

 

Conclusion

It’s clear that US markets are in a corrective wave within that secular bull. That corrective wave started late 2014 and has shown sideways movements since. The bull  market, in my opinion, will break out again –but not without a catalyst. That catalyst hasn’t appeared yet. So we should assume more sideways (big up / swings) patterns until proven otherwise.

My outlook remains: Near termed bull (days) rally, mid-termed bear (correction), long termed bull (secular bull market).

As such, I expect to sell in the coming days  on a rally (assuming there is one….) then to buy back in at a later date and price point that has yet to be determined.

 

 

 

15 Comments

  • Dear Keith,

    I am deeply greatful to you for all your accuate guidance. I have been investing for over 30 years and always need a professional to validate my own investment decisions….and thats YOU!!

    I have humbly made amost 7 figures in the past 6 years due\ring this bull market…. and have donated 6 firuges to charities over the years to help those less fortunate people…… and the credit goes partly to you.

    Just wanted to let your followers know that I check you blog all the time and that I am deeply gratetful for all your accurate advice!

    Bottom line: …YOU ARE MAKING A BIG DIFFERENCE IN MANY PEOPLE’S LIVES….SINCERE THANKS TO YOU!! Your work is deeply appreciated.

    Most sincerely and humbly,

    Jay

    Reply
    • My pleasure Jay
      And I am glad you get pleasure in being able to give to your chosen charities.
      This is a benefit of capitalism. You can earn money through integrity, application of hard work, skills, and productivity. You can then choose to donate a part of those earnings to a worthy cause that calls to you from a personal level, whatever that may be.
      Personally–I’ve got a soft spot for animals–wild and domestic, and as such donate to organizations helping those animals needing of protection. At ValueTrend, we also make specific community donations and support the drug awareness campaign for high schools.
      So thanks for this reminder that we all need to think outside of our own worlds.

      Reply
  • Hi Keith,

    I read your blog last night, and I also wanted to write to you to express how much I appreciate you sharing your knowledge. I share Jay’s comments above, and am extremely grateful. I love trading and market analysis. It is always nice to get validation from a professional, but regardless, I really value your insights into the market based on technical analysis and your trading strategies. There is always something new to learn. Moreover, we seem to be of like-mind in a number of areas both market related and external to that. I am very glad to have made your acquaintance.

    Thanks, Ron

    Reply
  • I agree wholeheartedly with Ron and Jay and never buy or sell without checking in on your blog first. I appreciate your analysis and the time you take to respond to questions. Often that provides additional and valuable information.

    Thanks for all you do.

    Reply
    • thanks Lorraine
      BTW–to all–if you like the blog–please share it (forward a link/ tweet, or whatever you wish) with your friends!

      Reply
  • Keith – as many others have shared – I love your blog and find it extremely helpful in navigating the quite volatile marketplace. I’ve been reading and some have said The Russell 2000 is already down 11% on the year and has “officially” entered a bear market for the first time since 2011. Folks like Mark Hulbert have said we are partway through the bear market already and by the time the S&P 500 drops 20% to officially signal “bear market” – it’ll be over. I know you are calling for a continuation of a bull market. What do you make of all this? Thanks much!

    Reply
    • Thanks Jim
      I guess you have to define “bull” market. Yes, many define 20% corrections as a bear market. But if you look at the moves contained within SECULAR (long multi-year) sideways markets–bear markets are way more than 20%. Eg–we were in 2 secular sideways periods containing bear phases that literally chopped markets in half

        on several occassions. Witness the secular sideways era from 1965-1982. Big 50% bear in there as the Dow fell from 1000 to 500–plus lots of other significant bears in that same 1965-82 period.
        Witness the secular sideways era from 2000-2013. Two big 50% bears (tech bubble, sub prime/ oil bubble).

        Now witness the bull markets –particularly the grandaddy of all bulls, the 1982-1999 bull market. Within it, there were reams and reams of 20%, 25% and higher corrections. 1987, 1998 were two that I lived through as a personal investor and then as an industry player. Heck, witness the 2011 bear–it was 21% (spring/summer of 2011).
        So my bullish view is that of a macro one. There will be many, many 20-25% corrections along the path to the peak. Which in my view will not come until around 2020 or later. And no–I or anyone else cannot predict the level a peak might reach. That’s futile–all we should worry about is the trend–and cycle–which are both (from a secular standpoint) bullish.

      Reply
  • Wow Keith – thank you for your very detailed explanation – that makes a lot of sense. Once again – you demonstrate to me how knowledgeable you are in this field. Keep up the great work!

    Reply
    • Thanks. Monday’s blog will have a few points to add to this one.

      Reply
  • Noticing crossing of 10 / 20 month ma on Dow, happened in 2001 and 2008….. interesting!

    Reply
  • UGLY PICTURE ON OIL?
    ON A MONTHLY CHART (6 AND 10 MONTH E.M.A.) DATING BACK 20 YEARS AGO, VARIOUS SUPPORTS CAN BE FOUND ON WTIC.

    2009 LOW AT $33.55
    2003 LOW AT $25.08
    2001 LOW AT $17.12
    1998 LOW AT… $10.65
    MAY BE IT IS TIME TO TALK TO JOHN KILDUFF?

    Reply

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