A Period Of Melt-Up For Stock Prices

Treasury Bond prices are heading lower, which means higher longer-term rates. This obviously favors owning stocks versus bonds. 

A weak dollar and weak Treasury prices often go hand in hand, and initially this can really help our stock portfolios. But be aware that if these charts are indicating inflation, and inflation rises too high and too quickly, it will be bad for both stocks and bonds.

The Long-Term Outlook

The ECRI index continues to point higher, indicating solid economic growth four to six months into the future.

Every time we get one of these megaphone inverted triangle patterns, it looks like the end of the world to me. But, in my experience, they generally result in higher prices.

I forget who it was that had me convinced that we should be looking at this geometric index instead of the SPX to measure the strength of the stock market. Currently? I don't think so. 

It did a very good job of warning about the peaks in the 1999-2000 period, the peak in 2007, and even the short-lived peak in 2015. Also, it did a really great job indicating that the lows were in for 1991, 2003, 2009, and 2016. But how about now? You missed much if you believed that 2018 was the top. I can't really explain it, but it is still very interesting to me. 

That is enough charts for today. We are probably witnessing a period of melt-up for stock prices, which, as we all know, can be very profitable, but also presents the possibility of considerable downside. So, I will try to participate and profit, but I'll be ready to go to cash when needed.

Outlook Summary

  • The short-term trend is up for stock prices as of November 3.
  • Contrarian sentiment is unfavorable for stock prices as of November 14.
  • The economy is in expansion as of September 19.
  • The medium-term trend for treasury bonds is down as of October 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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