Market Briefing for Monday, March 6

Mounting evidence of stretched valuations, amid droning debates about'how high is high' and 'can this keep going' discussions, have not combined to derail our primary uptrend from Election Day to this point. We have noted this every day and every week during our consistent four-month bullishness.

While a likely 'test' of the past week's high becomes rather crucial 'in theory'; there's no technical analysis (yet) which would somehow deny the prospect of a first sell-off (the past week's pullback was merely normal 'inside day(s)' consolidation as I described; including Friday's forecast afternoon rebound above a semi-demarcation point in March S&P futures near the 2380 level). 

On Saturday you got more political skirmishes (and so far they are limited to this insane and counterproductive jockeying between the sides), this time a suggestion that more Democrats met with more Russians than Republicans did; or that President Obama had Trump Tower 'wiretapped' before the vote. 

All of it is degrading and attempts to disrupt the focus of the Administration; as many apparently want the nation not to grow; to repatriate jobs; or even go forward in a world of relative peace and stability. It seems some thrive on anxiety,global tensions and actually are fearful of international harmony. 

And it is this realm that matters to the markets. Stocks are up not because a 'technical' chart or 'fundamental' table of projections says so but based on a vision of a better and stronger America; not isolationist, but not trampled on by a few countries in particular, that took advantage of trade relationships. 

It also requires the ball not be taken off healthcare and particularly the 'tax reform' expectations, that really are at the heart of corporate (bank stocks of course as well) earnings growth expectations, even before real GDP gains are reflected in the economy. 

In sum 

The market needs to revisit the upper levels and ascertain whether a correction has started (less likely odds although some distribution clearly has been evidenced for about two weeks, and much of the rocketing-rally in the wake of the Trump speech was, as expected, short-covering based; for sure part of why we said the day before that if it was 'inclusive' (it was) and not belligerent (it was not) that the market would rally strongly thereafter). 

The fact of an economic sluggishness against the backdrop of optimism for the future, suggests that the market can work higher 'in a perfect alignment' as this is, as I've suggested since early November, a 'transformation' rally in its entirety, and not based on anything you can divine solely from technical or fundamental assessment of 'known' trailing or forward EPS or even GDP estimates. You could almost call it a 'faith-based rally' that totally delivered. 

While we certainly do not want to chase price now; and we do believe that a correction is coming (as I outlined in the videos as far as how we determine recognizing success or failure of rebounds and when to look for pressures), it may not reverse the primary uptrend. Only political undermining can do it. 

The rejectionists probably should be careful what they wish for; lest they do succeed in crippling, if not mortally wounding, our own government; and the stock market response would be horrendous; with them getting the blame. 

Bottom line 

Last year I mostly faded rallies; believing that monetary policy and corporate buybacks were artificially holding-up the market. That worked even as most funds underperformed the market. Buying dips worked too; at the same time fading rallies worked better so was the main thrust for a time. 

That ended with the call for Brexit to pass and the ensuring sell-off to turn to a new high, unlike the panic Soros and others called for. I also said that with no political bias, I believed Trump had a good chance to win (we used IBD as well as LA Polls to argue the elitist presumptions), but nobody believed it (maybe not even Trump). And because we thought many funds were fairly horribly positioned, ignoring old-line industries that would benefit, that there would be an explosive rally if he won. 

I said for weeks 'you won't believe how bullish I'll be' if he does; not because I like him (I knew all the negatives too) but because it's a transformation not anticipated by Wall Street, but one that Main Street truly wants, and needs. To do this, we had to view the market as 'more art than science', thus blend technical and fundamental analysis with an overweight of 'psychological' on a belief the market was ill-prepared for the radical restructuring approach. 

For now follow-through both in markets and policies are required.