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.
- Beware Of Central Bankers Bearing Gifts by Danielle Dimartino-Booth via MoneyStrong
- Trump’s Budget Is The Ultimate Con by Derek Thompson via The Atlantic
- What Keeps BofA Up At Night? by Tyler Durden via Zero Hedge
- Trump Budget: All Hat, No Cattle by David Stockman via Daily Reckoning
- Trump’s Budget Will Supercharge Economy by Stephen Moore via The Hill
- The Return Of Rosy, Fuzzy Math by Caroline Baum via MarketWatch
- Economy Needs Workers & Trumps Budget by IBD
- One Big Problem With Fed’s Balance Sheet Plan by Pedro Da Costa via BI
- 9-Top Takeaways From Trump’s Budget by Rob Garver via Fiscal Times
- Republicans Always Take Office At Market Tops by Patrick Watson via Mauldin Economics
- Why Businessmen Fail At Government by Ludwig Von Mises and FEE
- Monetary Policy Strangely Devoid Of Money by Jeffrey Snider via Alhambra Partners
- Economic Forecasting Very Much Broken by Narayana Kocherlakota via Bloomberg View
- The Trump Budget Doesn’t Balance by Robert Samuelson via RCM
- Inflation Is NOT Evenly Distributed by Charles Hugh Smith via Of Two Minds
- Will “Gradually” End Differently Than “Measured” by Peter Boockvar via The Boock Report
- Hop On The Bus, Gus by Eric Cinnamond via EricCinnamond.com
- Traders Can Make A Killing Chasing “Smart Money” by Joe Ciolli via BI
- The Big Picture by Ray Dalio via Linked-In
- The Bubble That Could Break The World by James Rickards via Daily Reckoning
- Bull Market Not Hated, Just Not Trusted by Michael Santoli via CNBC
- How To Avoid Losing In Age Of Trump by Nigam Arora via MarketWatch
- Bears Have Made Some Progress by Chris Ciovacco via Ciovacco Capital
- Emerging Markets Still Look Strong by Michael Kahn via Barron’s
- It’s A Battle Between Politics & Liquidity by Sue Chang via MarketWatch
- Tech Stocks Haven’t Done This Since ’99 by Evelyn Chang via CNBC
- What NOT To Buy In Today’s Market by Vitaliy Katsenelson via Contrarian Edge
- Connecting The Dots by Erik Swarts via Market Anthropology
- How Companies Fib About Earnings by John Crudele via NY Post
Research / Interesting Reads
- “Liar Loans” Dog Automakers by Wolf Richter via Wolf Street
- Manipulation In The VIX by John Griffin & Amin Shams via University Of Texas
- Houston, We Have An Employment, Wage Growth Problem by Aaron Layman
- 6-Terrifying Graphs Of America’s Pension Problem by Tyler Durden via ZeroHedge
- Beat Robo-Advisors At Their Own Game by Andy Hyer via Nasdaq
- Paying Social Benefits by Buttonwood via The Economist
- Understanding Today’s Secular Stagnation by Robert J Shiller via Project Syndicate
- Stock Ownership Down Among All But High Income by Jeffrey Jones via Gallup
- Valuation: A Less Miserable Measure by Ed Yardeni via Yardeni Research
- More Risk And Less Return In New Era by Nick Maggiulli via Dollars and Data
- Hidden Debt & Deficits – 2017 by Joshua Rauh via Hoover Institution
- 5-Facts American’s Know Nothing Of Money by Catey Hill via Moneyish
- One Man’s Ceiling Is Another Man’s Floor by Cliff Asness via AQR Capital Management
- Being Wrong In An Interesting Way by John Hussman via Hussman Funds
- A “Dead-Cat” Bounce In Stocks? by Dana Lyons via Tumblr
- “Reward Free Risk” – Here It Is by Jesse Felder via The Felder Report
“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.
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
Customer Relationship Summary (Form CRS)