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Going & Going (Up) May 23, 2020

Posted by Tom in Thoughts.
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May 22, 2020 – Wow . . there’s really not a whole bunch (new) to talk about. This market just keeps going & going. But that will come to an end, the only question is when. With the FED pumping money into literally everything there seems to be no bottom and hence “no fear”. That in itself is a danger sign. I’ve seen small yellow warning flags but many times they will pop up then disappear. Case in point is the ratio of up volume vs. down volume. For a couple of days it flashes “Yellow” (distribution), then backs off. So . . I’m looking at multiple sensitive indicators that show if money is being pulled out. So far, nothing there, but that could (and will) change quickly in this environment.

One theory is that we won’t see a meaningful pull back until late in the second quarter, when big corporations start to see that earnings are not very good. A last, this depends more on the consumer and than the FED. The folks at SentimentTrader.com did a study going back nearly to the 20’s/ 30’s to see how this market compares. The charts are shown below.

courtesy SentimentTrader.com

Note the current market is shown in light blue and the “parallel market” is shown in dark gray (click on graphic to enlarge). What does this mean? Well . . take your pick. Either we’re at the point of a consolidation phase or near a top or still have some room to go. (It’s never easy) What will drive this market (I think) is how the consumer reacts to this “opening” phase. Will they come back strong, will the virus also come back, will things just slooooowly return. My feeling is the latter, but who really knows. In an election year, there will be a lot of bantering back & forth, that is for sure !

NASDAQ Composite: click to enlarge

All I can say is that the parallel trend channel continues upward (for now). But IF we do get a correction / pullback, it will likely be modest, the FED will pump away (there is talk of them buying stock to prop up things IF it gets out of hand). OMG, bonds are not enough to support?

Sector short term strength is shown below. Note the leaders continue to be Technology based sectors. When that show stops . . look out. That is what is driving the market indexes higher.

That’s about it for now. Those in the U.S., have a good Memorial Day. Take Care ! …….. Tom …….

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

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