Marketview: Caution Tape

Last week I discussed the fact that we are now in the stage where the bull market gets messy.  We witnessed some of this pent up volatility this week.  Nothing has materially changed from a macro perspective and yet a couple observations give me pause.  First, there was a move into safety related names this week as evidenced by the two top performing S&P sectors of healthcare and utilities.  Second, the stalwart $DJIA failed to confirm the highs made by both the S&P 500 and Russell 2000.  Taken alone and without context neither of these events mean much, but given the mature stage of the latest rally it makes sense to highlight their importance.

The bull market is has reached a maturity phase and needs to consolidate these gains.  When you look back on historical bull market runs these consolidation periods look somewhat benign; they are anything but.  Market participants will run the tape into new highs and then back and fill violently.  These types of conditions shake the majority of investors out, especially the ones who acted on the uptrend first and already have gains.

I am not saying that the market will turn on a dime here or we’ve seen last of new highs.  The personality of this tape has changed and traders have to change with it.  There is some negativity creeping in that needs to be resolved.  This could easily be resolved with higher or lower prices at this point.  Long-term, all the trend indicators are still in tact and pointing skyward.  Short-term, they’re coming for your stops.

Winners: $UNH, $GILD, $PFE, $BMY, $MCD, $JNJ, $AMZN, $CSCO

Losers: $BHI, $SLB, $OXY, $C, $MS, $GS, FCX, $CAT

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