Marketview: Pick Your Narrative

An action packed week with many different causal factors for investors to lean on.  There’s the Draghi going all in to save the Euro camp, the open-ended Bernanke put crowd, and the China will jumpstart growth via massive stimulus posse.  These are very nice stories but the reality is that the market is as healthy as it gets in a post-crash world and wrong-way traders are covering or chasing performance.

The bull market isn’t young by any stretch but it still feels like we have some time before the musical chairs/find-the-last-sucker stage of the rally.  To start with, the market closed the week the absolute highs.  Breadth is at an all-time high, the value vs. growth ratio moving higher, and our MAMO and MAMOx indicators still skewing bullish it’s hard to see this market not consolidating or auctioning higher in the near-term.  With the exception of $FDX lowering growth forecasts, there was very little in the way of negative news flow this week.  From a sentiment perspective, overall public opinion of the market is best described as jaw-dropping disbelief.

Winners: $MS, $BAC, $FCX, $CAT, $APA, $APC, $AMZN, $EBAY

Losers: $KFT, $WAG, $EMR, $EXC, $CL, $PEP, $UPS, $FDX

The technology leadership torch appears to have been passed to the materials sector.  I expect materials, energy, and financials to lead the rally as we mature and reach an acceptance phase. Watch out for the upper channel in the value vs growth ratio to act as resistance.


Check back to a this post on historical analogs for a longer-term perspective.  Nothing has changed, but there is a possibility that we are in the 1970 analog.  I will do an update post as conditions change.

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