Thirteen Charts Tell The Story

It is said that a picture is worth a thousand words. So, this week, I've decided to try and sum up the keys to the current market environment with a series of charts and graphs. I started out looking for five key charts. That quickly turned into ten. And before I knew it; I had a baker's dozen. And frankly, I'm sure I've skipped some key stuff. So many messages, so little time!

The areas I focused on include the technical picture of the market, the state of the current trade, market valuations, the Fed/monetary policy, and the #GrowthSlowing theme. So, without further ado, let's get to it.

The Technical Picture

Some analysts suggest we are currently experiencing a replay of last year's Q1 market action. We had a very nasty/scary pullback that was followed by a return to rally mode and eventually, new highs. However, one thing that was missing from last year's rebound were indications that there was some "oomph" behind the move. And as most analysts know, it is that "oomph" which usually accompanies a fresh leg of a major move.

As it turned out, the lack of "oomph" to last year's rally turned out to be a precursor of bad things to follow. Sometimes, it does indeed pay to read the tea leaves in this game.

The good news is that this time is different. This time around, there are an abundance of "breadth thrust" indicators that have flashed buy signals, which is a sign that there indeed is some "oomph" behind the move. Below the latest signal to trigger - the percentage of stocks over their 50-day moving averages.

Breadth Thrust Buy Signal

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Source: Ned Davis Research

History shows that when 90% of stocks are above their 50-day ma's, the trend ...

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Bull vs. Bear. The Line In The Sand?

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Herd Behavior

"Herd behavior, or the tendency of individuals in a group to 'follow the trend,' has frequently been observed in equity markets. Herd behavior in investors leads to a convergence of action." [Yan, Zhao, Sun (2012)]


"Theoretical models on herd behavior ...

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Where Do Things Stand Now?

To be sure, it is rare to see the mood of the market swing from the depths of despair seen on Christmas Eve to the "happy days are here again" feeling of last week in such a short period of ...

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All Clear?

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Is Enough Baked In?

After a very scary decline and then an impressive rally, the question most investors are probably asking themselves is, where are we now?

In order to get our bearings, let's review where we've been. Recall that as of the market ...

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The Daily Decision for 1.7.19 - The Magic Words


The State of the Markets:

Well that was fun. Don't look now fans, but after Friday's joyride to the upside, the S&P 500 is up nearly 8% from its Christmas Eve low and is now down only -13.3% from the ...

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The Magic Words

Well that was fun. Don't look now fans, but after Friday's joyride to the upside, the S&P 500 is up nearly 8% from its Christmas Eve low and is now down only -13.3% from the most recent high water mark. ...

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Is It Over? And What To Expect Next

I ended last week's pre-holiday missive with the following: "It is easy to say the bulls are due. Really due." And as if right on cue, stocks proceeded to bounce hard the following session with the Dow Jones Industrial Average ...

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More Than Meets The Eye Happening Here

I attended a holiday gathering for one of my advisor clients on Friday evening. While everyone appeared to be in the spirit of the season, when the conversation eventually turned to the market action, the mood quickly changed.

In talking ...

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