The votes are in and apparently the winner is “gridlock”. What a difference a week makes! Today, on day #7 of a new attempted rally, the stock market experienced a “follow-through” day and confirmed a new uptrend based on the price and volume sequence we discussed previously. It is important to remember that while every major bull market of the past 100 years has started with a follow-through day, not every follow-through day leads to a new bull market. The key risks for a failure of a F.T. day come in the first 3 days after a new signal. If the stock market can advance or just sit tight for the next 3 days and NOT experience Distribution Days (aka professional selling), then the market should build even more strength and possibly provide a year-end rally. A big test is coming tomorrow (Thursday) with the Federal Reserve Board’s interest rate decision and their outlook for more hikes in December and 2019.
While the markets current 7 day rally attempt and today’s FT day have repaired much of Octobers damage, a couple of key technical internal indicators have not yet given the all clear signal. Of the 4 specific technical events we are watching for to affect a change back to a green light, only two have happened yet. Based on these technical facts, our Current Market Outlook has been upgraded to “Uptrend Under Pressure” and the light is now “yellow”.
During the past few days we began increasing our equity exposure incrementally in a few of our strategies in areas where strong relative strength was being exhibited. We have also identified several excellent companies and sectors that will likely round out our portfolios positions if the markets advance triggers an upgrade to a green light soon. While the election results were a boost to the markets (and the first of the 3 possible catalysts discussed in the 10/31 post), the Feds pending rate hikes and the ongoing China trade war still loom large. Continue to be patient and hopeful and keep your eyes on the market action over the next 3 days. Have a Triumphant day! ®
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