A New Short-Term Downtrend

This is my favorite group, and they recovered very nicely on Friday with a good AMAT earnings report.

Banks have decisively broken to new highs.

I'm a believer that this market is headed higher (although not in a straight line), and I also continue to believe that we will see a new set of market-leading stocks.

The Longer-Term Outlook

The ECRI index looks like it has finally started to top out. In the weeks ahead, I will be listening carefully to what the people at this economic institute have to say about the future of the economy.

10-year yields were the big story of this past week. I believe that strong bull markets are accompanied by rising long-term rates, so I see this as good news for stocks. But I also believe that it plays a large part in the rotation among industrial sectors as the bull market proceeds.

Early in the cycle, small-caps with highly leveraged balance sheets perform the best, but then they are replaced by the larger-cap stocks that have the capacity to supply the needs of the expanding economy. Then down the road, the stocks that are the least impacted by rising rates and those with the strongest balance sheets will be the leaders.

I'm still a believer in this group, and I think that a powerful base is developing that may be very profitable. I'm not a buyer yet. I'm watching and waiting.

Outlook Summary

  • The short-term trend is down for stock prices as of Feb. 18, and we are in a new downtrend.
  • Contrarian sentiment is unfavorable for stock prices as of Nov. 14.
  • The economy is in expansion as of Sept. 19.
  • The medium-term trend for treasury bonds is down as of Oct. 10 (prices lower, yields higher).
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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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