The market has stuck to the original plan, which has been for relief/bounce/rally activity into the November-December seasonally bullish time frame. While I thought that the elections (and possibly the FOMC) had a chance to alter the situation short-term, a divided congress and presidency appears just what the sentiment doctor ordered. That thought exercise was incorrect. We go with it.
As noted in NFTRH 524, the lean (slight though it was) was toward resumed upside after Friday’s pullback. This view is due almost entirely to what was still very over bearish sentiment. But now the market is threatening technical resistance levels and typical of these relief rallies, it could go on just as long as needed to reset that bearish sentiment to bullish again.
A look at how the various indexes and sectors look after today’s post-election pop.
Dow has broken through the SMA 50 and lateral resistance and now looks to test the highs. Imagine a nice ‘Dow at all time highs!’ headline out ahead for the media to trumpet? SPX is not quite as good as it tests the SMA 50 and the rest of the indexes remain in technical breakdown mode (i.e. below resistance and not yet reclaiming the intermediate trends because they are below the 50 day averages).
Financials, Energy, Industrials, Materials and Internet are all still in ‘bounce only’ mode. That does not mean it will remain ‘bounce only’. It just means that technical levels have not been reclaimed that would indicate otherwise. Healthcare, as has been the case for months now, remains the best of the bunch.
Medical Device held the SMA 200 perfectly, is bouncing and would actually get bullish with a rise above the October high. Bio is on a snap back bounce. Pharma is better (ref. PPH added yesterday per Trade Log). Airlines may be up to something (ref. AAL added yesterday per Trade Log). Defense is bouncing.
Even the defensives continue to do well as Utes and Staples keep their bullish stance while Discretionary, Retail and Homies remain in bounce mode.
I would be cautious on the gold miners even if the market’s bounce is to be ill-fated like the one in 2000 that we reviewed in NFTRH 523 (I believe). If SPX fails here and now, that’s a different story and could be a good signal for the miners. But if this is an extended bullish phase into December the miners would probably be on the outs for a while.
We also can’t rule out that the analysis is being whipsawed again. We had the grind to a top-test right all summer, but then got compelled to call it successfully tested after SPX held up for multi-weeks in ‘new highs’ territory. Then when it failed those highs we grew cautious and when it broke trends, bearish (for 2019). But there is always the chance that this rally could undo the technical damage and if it does, I will be a good TA robot and note and obey that.
But then again, that’s what relief rallies do. They make we people pretending to be robots feel all too human. As of now, the best theme seems to be that we are still on track for the November-December bullish seasonal and then we evaluate. The plan is to go bearish, but we’ll have to be open to revision if need be.