The Longer-Term Outlook
This is a very basic look at the current market. The S&P1500 is rising nicely although it looks overdue for a test of the 200-day average. We usually get a couple market sell offs that test the 200-day each year.
The AD line has been pushing up to new highs which confirms the S&P1500 price highs. But the UD line has been weak which is a negative divergence with stock prices.
Since the market is overdue for a pull back, and volume is not confirming, then you have to at least be on the look out for the possibility that prices will come down sometime in the coming months. But it is only a caution signal, not a prediction of lower prices.
At the moment, in my view, this chart favors a price pull back short-term, but higher prices long-term.
Longer-term rates leveled off in December, and are currently pointed lower. The bank/utility ratio is pointed lower as well which is a confirming signal for lower rates.. for now.
Also, it looks like the 30Y rate peaked at a lower high, although the pattern could also be a bull flag that breaks higher.
For now, I am assuming lower rates until the chart pattern says otherwise. Lower long-term rates favors dividend-yielding stocks.
Strong stock prices are not being supported by the trend in new 52-week highs on the NYSE, and the pattern is similar on the Nasdaq.
This is another data point suggesting the possibility of a pull back for stock prices. Emphasis on the word “possibility”.
The ECRI index has been falling for several months, but only after reaching up into unsustainable territory.
It is still declining, but the rate of decline will probably start to level off soon and settle into a level indicating the slow but steady economic growth seen over the last 10 years.
It is good to see oil prices rebound and back into the trading range. A collapse in oil prices would work against the general stock market.
This chart favors stock prices longer-term.
