This cyclical bull is currently still trading at a major 3 - 6 month (intermediate term) overbought.
The SPX is near its recent all time high, but positive momentum has stalled in recent weeks and
the uptrend line off the post-election rally has been violated. But, there is not enough evidence to
argue that the rally has ended yet. On the fundamental side, my forward looking cyclical weekly
indicators have also flattened out. With the Fed in tightening mode, market players are watching
weekly and monthly indicators carefully. Monthly business sales have lifted nicely and profits
data is improving but other core measures of economic health such as industrial production, the
real wage and 12 month civilian employment growth are far less imposing. By the same token,
the slow pace of broad economic growth still leaves expansion potential ahead. My business
strength index stands at a mild 133 with economic overheat set well above at 140. Overall, there
is 'room' for another pronounced slowdown in the weekly cyclical data set which could trouble
the market, but there is enough slack to warrant the suggestion that any sharp slowing in the flow
of short term data may be followed out in time by yet another cyclical upswing. SPX Weekly
With the growth fluctuations in a lengthy but slow economic expansion still leaving slack to
be taken up eventually, and, with the Trump stimulus programs still to be fought over, it is not
hard to understand the now popular idea to stick with a high equities allocation and not bother
with market timing. I am too much of a trader to be comfortable with such reasoning.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!