The Rally That Never Ends

Stocks Increase On Earnings & Economic Data

Stocks increased yet again on Thursday as this has been a great start to 2020 for the market. There were some earnings reports and a few economic reports that must have pleased investors. The retail sales report wasn’t bad or great. Maybe that’s enough to satisfy investors. The jobless claims and Philly Fed reports were very strong. The Housing Market index was strong too, but it fell slightly. Based on my fundamental analysis of the economy and earnings, I’m bullish, but valuations and the recent extreme momentum have scared me away. I have been too bearish this year.

The S&P 500 rose 0.84% to another record high. It’s up 2.66% year to date. It’s on pace to have a better year than last year which I have previously said was impossible. It’s almost up 4% which was my end of year target. The CNN fear and greed index is making a mockery of itself as it increased 3 points to 89 which is extreme greed. Commentators who stated extreme greed is normal are now taking victory laps. It’s an amazing thing to experience. As of Wednesday’s close, the 14-day RSI was at 70.35. I think it is close to 73 after Thursday’s gain.

Interestingly, the AAII investor sentiment survey showed the percentage of bulls increased 8.8% to 41.8%. That’s 3.8% above average. It’s obviously not surprising that there are more bulls than average. It’s not even that surprising the percentage jumped so much. What’s surprising is during one of the sharpest rallies in recent memory, there were less bulls than average (last week). This indicator has been sobering because it has mostly suggested in the past few months that there hasn’t been euphoria. This week, the burst in bulls mostly came from those who were neutral as the neutral percentage fell 6.4%. The bearish percentage fell 2.4 points to 27.5% which is 3 points below average. This indicator suggests there is some excess optimism, but nothing to warrant selling stocks.

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