• All of the major indices hit all time highs last week.
The negatives
The market is overbought to an extreme. The Russell 2000 (R2K) has been up for 15 consecutive trading days as has the NASDAQ AD line. These kinds of extremes usually occur near the beginning of long up moves, but, every now and then they occur at short term tops. Bonds are oversold to an extreme. Usually stocks and bonds move together. We are looking at extreme opposites.
The positives
. . .
Seasonality
Average returns for the coming week have been weaker during the 4th year of the Presidential Cycle than other periods.
December
Since 1963, over all years, the OTC in December has been up 60% of the time with an average gain of 1.9%. During the 4th year of the Presidential Cycle December has been up 69% time with an average gain of 1.2%. The best December ever for the OTC was 1999 (+22.0%), the worst 2002 (-9.7%).
Conclusion
Everything you look for in a bull market is happening to extremes. Except bonds which are at extremes in the other direction. I expect the major averages to be higher on Friday December 2 than they were on Friday November 25.
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