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Weekend Reading: Correction Over As “Trump Hope” Remains

Written by Lance Roberts | May 26, 2017

Over the last couple of months, I have repeatedly discussed what has been possibly the most “boring” market ever. That was until the previous Wednesday when the market deciding to take a quick “road trip” to the 50-dma. 

It didn’t last long.

The market promptly went back to sleep in a light volume flotation (note decline in volume during advance) back to old highs. Yesterday, after multiple attempts, the market was finally able to muster a breakout above 2400 as “hopes and dreams” of “Trump tax cuts” once again took the lead over worries of “impeachment.” 

While on a short-term basis, the bullish bias continues, which keeps portfolios invested, for now, the intermediate-term (weekly) trends also remain within the confines of the bullish trend from the lows of 2016. However, the “alert” signal still remains from a very high level as markets push back into extreme overbought terrain. This suggests that upside is somewhat limited as there has not been enough of a correction to alleviate more extreme conditions.

Importantly, as noted on Tuesday, bonds aren’t buying the breakout:

“Lastly, despite stocks pushing near all-time highs, the bond market continues to flirt with levels close to 2%. The continued move to “risk off” holdings, despite a rising stock market, suggests that ultimately either stocks OR bonds will be wrong. Historically, bonds have tended to be right more often than not.”

Economic data is not buying it either, as data continues to come in softer than expected from new and existing home sales, to autos, to inventories.

Either the stock market is right and everything is going to play “catch up,” or it’s not.

While we remain long-biased in equities currently, we continue to remain wary of the underlying deterioration in both market and economic data.

Yes, anything is certainly possible. It just usually isn’t. 

In the meantime, here is what I am reading this weekend.


Politics/Fed/Economy


Markets


Research / Interesting Reads


“Anybody who plays the stock market, not as an insider, is like a man buying cows in the moonlight.” – Daniel Drew

Questions, comments, suggestions – please email me.


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Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube

2017/05/26
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