Market Outlook:
There always seems to be something to complain about in the stock market this year. The length of the bull run. Valuations. Inflation. Deflation. Growth slowing. On it goes. And now there is word that the way the market has rallied over the last 26 days is also something to be feared. I saw a report that shows when the market has been above its 5-day moving average for more than 22 days, a pullback tends to ensue. The author notes that 10 days after the market has been above its 5-day for more than 22 days, the average return has been... wait for it... -0.15%. And the median return was -0.89%... the horror! Never mind the fact that there are only 7 prior occurrences and that stocks were higher 3 times or that we're already 4 days past the old record and have tacked on 1.46% in the meantime. the key seems to be that the sky is going to fall - and soon. Granted, stocks are overbought and due for a rest. However, the bottom line is our market models remain positive on balance at this stage.

Looking at the Charts... All sarcasm aside, the action on Friday wasn't the best. The market got good news from China and the ECB and yet the bulls didn't do all that much with it. Sure, all the indices save the Russell 2000 broke out. And yes, there were a bunch of new highs. However, there was also a fair amount of intraday selling as the recent trend of selling into all new highs remained intact. As such, the breakout to new highs was less than impressive and in effect, leaves the door open for the bears to attempt yet another "breakout fake out." Therefore, we will be watching the 2050 zone closely during this holiday-shortened week as a close below this line in the sand would negate the breakout and likely embolden the bears for a while.

S&P 500 - Last 3 Months

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