alice

NFTRH; Market Direction Chosen

It’s all we’d asked for; a direction… please?  Last week NDX got near its highs and the SOX got above its SMA 50, leaving the Dow and SPX still in technical correction/consolidation mode.  No more.  Now, assuming this is not just a news-induced whipsaw, we have a market that is not overbought setting its sights on new highs.

spx

The reason I don’t assume it’s a news-driven event is because I question what, if anything, the news from France had to do with much of anything as far as stocks go.  I think it removed some doubts and served as an ignition switch to something that was trying to happen anyway.  The market had, after all, fulfilled the minimum requirements for a corrective consolidation by getting to the SMA 50 in some indexes and sectors and dropping through it in others.

Also, as noted using Smart/Dumb money graphs, sentiment had come to the points it had reached during last summer’s Brexit tensions and the pre-election jitters a few months later.

So our theme had been to establish a direction, not caring whether it would be up or down, and then be in line with that.  The direction is up, not only in the U.S., but globally.  So I for one, am in line with that.  I took a loss on my final short (aside from silver), which was the small caps, and retain and add to long positions as long as the signals we got at the end of last week (NDX & SOX) and yesterday (Dow & SPX) look firm.  With the tweeter-in-chief promising fantastic tax reform plans this week, you would think the bull times would keep on rolling (unless the admin somehow falls flat on its face again).  While a ‘sell the news’ is possible, the technicals indicate that a new up phase is beginning, not nearing its end.

But I don’t want to get caught chasing the market’s hype drivers around.  So very simply, Dow and SPX have joined the bull party, global stocks are largely intact with some items (like EM) looking to break short-term consolidations.  European stocks, the epicenter of the hype, were up 4% yesterday.  Russia is now bouncing and may be forming a Symmetrical Triangle (ref. the lack of a higher high noted in NFTRH 444, which is consistent w/ a bullish Sym-Tri).  Plenty of other countries and regions were strong as well and since the trends have been up, that is reinforced.

Of course all of this would mean little (except to day traders) if this just a hype-driven suck-in.  But my job is to manage and write about the market we have and that market looks bullish, almost all around.  That would paint the risk ‘off’ items like Gold, Yen and Treasury Bonds as vulnerable.  We have noted Gold as vulnerable to peace breaking out, but it is also vulnerable to good times in risk ‘on’ markets.  Silver too.  Treasury bonds are no longer a contrary darling, as we have been gradually ramping down the view lately, most recently with another contrary indicator signal from Bloomberg, as noted in #444.

As I look around at writers and analysts talking about bubbles, caution and even a coming crash, one point I have been meaning to make is that… I know, it’s a high risk atmosphere.  I don’t want to avoid acknowledging that and indeed, we may well be entering blow off dynamics in the markets.  Gold would emerge as the process matures or completes, but please don’t get caught being a daily gold bug or market bear, ever in wait, ever watching – and cursing – the market.  Either sit out and have patience with the process or play the game.

So my point is, the analysis in NFTRH is playing the game.  If the market says bullish we are bullish.  We will not be sitting here fighting it week after week.  But we carry a bigger picture view for a reason and that reason is solemn and sober because someday there will be a lot of pain, an epic hangover, from the ongoing party.  I find that weekly management works well.  It was easier to be bullish last year because sentiment was much more consistently depressed (and because the SOX was oh… about 300 points lower).  But we have to call what we see and be prepared to adjust and refine, continually.

So as it looks now, the market has chosen the bullish direction.  We will update as frequently or infrequently (so as not to add noise to your decision making) as called for by the market’s incoming signals.  In other words, if this is a bull trap whipsaw, we’ll note it.  If things remain bullish, we’ll ease off and go back to managing bullish items (ref. the Intel NFTRH+ update last week, for example).