Bull Market Pause In March?

Inflection points such as the record October stock market peak and the panic low in December are the important milestones we endeavor to navigate successfully through this massive 10-year Bullish wave in US stocks. During the past 7 weeks of surging equity prices we have identified temporary pause points for minor 2% corrections, but continue to see little prospect of a major inflection point. The persistent upside move off the spike bottom at Christmas has left even the Bulls skeptical of the short term as they struggle to find a bargain buying pullback in what appears anecdotally to be an overbought market. Readers may recall throughout 2017 we noted the extremely low volatility and lack of corrections which we forecasted that would restrain Bulls from acting upon their upside outlook. The higher prices rose in 2017, the more cynical investors became, which maintained a healthy level of sideline cash to sustain the rally. While we don’t expect such a relentless 14 month run for the roses without a breather this time, the 2019 psychology thus far has paralleled 2017’s Bullish frustration among investors with rising optimism coincident with an inability to invest their dry powder funds due to a lack of corrections.

Technical overbought Sell readings are elusive despite the powerful 20% jump in stock indices since Christmas. Although imprecise, momentum extremes have arrived this week which imply a top that serves as a ceiling for stocks for several weeks to 2 months is due. Likely an announcement near March 1st of a China Trade Deal postponement or worse will trigger this corrective period in the March – April time frame. Given the November resistance in the low 2800’s basis the SP 500 Index and 26,000 – 26,280 basis the Dow, we anticipate that any further probing to new highs here will hit overhead price resistance and possibly the normal technical overbought readings we need for a correction to ensue.

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