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Re: DiscoverGold post# 71193

Monday, 01/29/2018 7:18:43 AM

Monday, January 29, 2018 7:18:43 AM

Post# of 76351
Weekly Market Summary
By: Urban Carmel | January 27, 2018

Summary: US equities have already gained more in the first few weeks of January than they do in many full years. The recent trend is being termed unprecedented, but these types of gains have happened before. The current trend is also being called unsustainable, but in most prior cases, equities have continued higher. The equity market is undeniably hot, and that can often lead to a period of retracement and decline, but trends weaken before they reverse, and this one has not shown any sign of weakness. The longer term outlook remains favorable.

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All of the US indices made new all time highs (ATHs) again this week. This includes the very broad NYSE (composed of 2800 stocks) as well as the small cap index, RUT. The dominant trend remains higher.

US markets have started the year like a rocket. SPX and DJIA are up 7.5% and NDX is up 9.7% YTD (from Alphatrends). Enlarge any chart by clicking on it.



These gains are equivalent to those of a full year, and it is still only January. In fact, SPX closed Friday at 2872, higher than the December 31, 2018 target for all but 3 of Wall Street's top strategists (from Barron's).



World equity markets are rallying, too. Emerging markets are up 10% YTD. The US is the next best performing market. Europe is up by 3% and Japan up 4%.



Breadth is excellent. 8 of 10 sectors are trading at 1-year highs. Only the Utilities and Real Estate sectors are lagging.



Overall, 83% of SPX companies are trading above their 200-dma, the most in a year, and 84% are trading above their 50-dma, the most since July 2016.

While the push higher in 2018 is undeniably (and surprisingly) strong, it is not unprecedented. Pundits fear that is unsustainable, yet the evidence suggests that is.

18 days into the year, SPX is up 7.5%. Unprecedented? No. 8 other years since 1963 have gained more during their first 30 days. Many of these years also followed strong gains like those in 2017 (from Rory Handyside).



The DJIA's gain after the first 15 days ranks only 10th in history. Unsustainable? No. 8 of the prior 9 closed the full year higher. In no instance was January the high of the year; there was a higher high in the months ahead every time. Note, however, that February and/or March retraced some of those gains (from Stock Almanac).



The accelerating trend in SPX is becoming parabolic. It looks climatic and unsustainable (the next two charts from Tom Lee).



Unsustainable? No. Mr. Lee compares the current phase to 8 similar instances. It's a small sample, but SPX ended higher after the next 12 months in 6 of these 8. Importantly, none of these parabolic phases marked the top. That said, in the short run, in all except one, SPX either consolidated existing gains or, if it moved higher, gave those gains up (blue circles). In other words, expecting the current torrid pace to continue unabated is low odds, but the gains so far in in 2018 are unlikely to mark a significant top.



The monthly relative strength index (RSI) for SPX reached 88% on Friday. Unprecedented? No, but certainly rare. It reached a similar level in both 1955 and 1996, and came close in 1986. None of these marked a top. In 1955, SPX gained another 15% in the months ahead; in 1986, SPX gained another 50% in the next year; in 1996, SPX was still more than 3 years from its peak, 128% higher (from Oppenheimer). . .



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https://fat-pitch.blogspot.com/2018/01/weekly-market-summary_27.html

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