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Pushing Higher January 11, 2020

Posted by Tom in Thoughts.
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Jan 10, 2020 – Wow, has this market been resilient or what?  In the face of bad news both domestic and geo-political, it just keeps going.  General concern is the timing of the overall business cycle.  The basic idea is that a capitalistic economy goes through cycles of expansion and contraction.  Expansion and growth are the result of a recession and a contracting economy (pent up demand).  The contraction occurs with things get “so good” that speculation gets out of control.  Read into that the recent mortgage “melt down”.

Next week, Tuesday I believe, we start the 4th quarter earnings reports.  Concern is that with all of the expansion and good news over the past 8 or so years are we in for a let down?  This market is priced for near perfection and broad disappointing earnings reports will catch up to the current “fear of missing out” philosophy.  Now that may not happen . .  yet, but it will eventually.  The key figure in the US is consumer spending which makes up about 70% of the overall economy.  Watch that for signs.

From the chart above we only see a positive trend, and we’re trend followers.  But I note that prices remain near the upper trend channel line and while wonderful, can lead to disappointment.  (click on chart to enlarge it)  The first level of support is 8934 on the NASDAQ Composite Index, next lower is 8790.  So I’ll get cautious with a close below 8934, and if it’s on high volume (significant selling), I’ll get very concerned.  In reality a bounce down to 8790 would be “healthy” and set things up for a run even higher IF earnings are reasonably healthy.

The (short term) sector strength table is shown below.  Not much changed but I note that Heath Care is showing recent strength.

Not much else to say.  So far in this climate one must be in the market . . . .  I just get concerned when everything and everyone is so complacent.

Have a good week.       ……….. Tom  ………..

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

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