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Friday, September 29, 2017

Daily update 9/29 U.S. Households Are Loaded Up With Stocks

Bull market target met.

The 2514 Elliot wave target was reached today.  Breadth was +57%.  New highs were 202.

A little quarter end buying.  The futures ended the day above the upper channel line.  Will they stay out there next week?  If so we are in accelerated up move mode.  If they come right back in the most likely result will be to pullback to the lower channel line.

The green count picked up a bit, but is still below 50.  It is not very strong looking.  I guess we will see if that matters or not next week.

QQQ had a nice day, but remains below recent highs.  I think this is probably the most important chart at the moment.  Will it continue higher or fail to break out?

For next week I will still be watching SPX for a close below 2490.  I will also be watching IWM and QQQ very closely.  Bulls want to see QQQ heading higher and IWM holding on to its new highs.

On the front page of the Money section of the USA Today there was an article about the Dow hitting 1,000,000 by 2117.  What the ...  I doubt there are many investors around today that plan to hold on to their equity positions until then.  What is the purpose of the article?  Are we supposed to invest every last penny we have because the Dow might hit 1,000,000 in 100 years?  Seeing that headline reminded me of the book Dow 36000 that came out right around the 2000 top.  The entire article seemed stupid to me and like something that would be printed around the time of a bull market top.  The sentiment is certainly very similar to past tops.

I have had an uneasy feeling this entire bull market that the end would not look like other bull market tops technically.  We currently do not have a technical condition that would make one think a bear market is right around the corner.  With the exception of QQQ not being at a new high with the other indexes and my green count being below 50 everything is perfect.  The last few weeks have seen some pretty strong buying.  The McClellan oscillator is positive for the first time since Aug. 2016.  So what happens now?  Does the market just keep on plugging away on the upside?  Why do I have this feeling I should be worried when there is obviously nothing to worry about.  Maybe it is the lack of worry by everybody else that bothers me.  I know for a fact the economy is not as strong as the pundits would have us believe.  However, there is no sign that a recession is in the immediate future.  With the economy only growing in the 2% range we could fall into recession in less then four months at any time.  But will anything happen over the next few months that would cause that to happen.  Auto sales have been bad, the housing sector is weakening and retail is closing stores at a higher rate then 2008.  While none of that seems to have shown up in the data can we be assured that won't happen over the next few months?  The ECRI WLIg indicator went negative this week.  That often indicates some slowing in the economy.  Is that just because of hurricanes and temporary?  I sure wish I knew.  Nothing would surprise me from here.  We could be 10% higher in 6 months or 20% or more lower.  I don't think I can say which one has the higher odds of happening.  Bull market tops happen when things are as good as they are going to get.  Therefore things always look good at tops.  Which is the primary reason most people never have a clue a top is upon them.  There is just enough going on in the economy that this could be as good as it is going to get.  The FED is raising rates and about to start reducing its balance sheet.  What affects on the economy will all that have in the months ahead.  Nobody knows.  I find it interesting that two interest rate sensitive sectors (housing and auto) are showing some considerably negative signs.  The FED's latest rate hike has not worked its way through the economy yet.  What happens if they hike again in Dec. like they are clearly talking about?  While everything seems to be perfect for the market there is a chance things go wrong.  The market is highly leveraged and is like a ticking time bomb.  Some day it will blow up, but we can't see the timer.

It is official.  This bull market is the second most loved bull market since data begins in 1950.  U.S. Households Are Loaded Up With Stocks

Due to the move to passive index investing in recent years I would not expect to see the euphoria seen in 2000.  Individual investors are all in.  The main driver to the upside will be incremental money coming in.

I think this is how many investors feel at this moment.  How much longer will it last?

Have a great weekend.


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