Hard to Fight a Trend

This market has a lot of momentum.

Yes, it’s an underwhelming statement; but it’s nonetheless true. The stock market has the wind at its back these days. Even in the face of scary headlines about Coronavirus epidemics.

The reality is that Coronavirus is having an effect on systemic profitability. It has altered behaviors and shuttered factories for many multinational players. The result is, not surprisingly, profit headwinds.

And yet this market goes higher.

Did we mention this market has a lot of momentum?

This is becoming a more concerning sign as retail investors shrug off concerns, rally behind the cry of a ‘good economy,’ and continue to push stocks to new all-time highs.

Currently, it’s tough to peg just how high this market can go. But the down-side has given us a few technical hints.

The January pull-back for the SPX set up a consolidation wave with support around 3285. This is a little less than three percent below current market levels – not exactly a massive pull-back if those numbers get tested – but enough to give traders a new entry point. And frankly, that seems to be the pattern of this market: buy the dips.

We’ve seen this before, and markets went significantly higher during 2019 when this happened. Will history repeat itself? Who knows? But did we mention this market has a lot of momentum?

Until evidence suggests otherwise, it may be wise not to fight the tape too much on this one. This bull will end, but the eminent demise is not evident at this time.


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