Market Signals Strength Long-Term: Weekly Nifty 9

Welcome to another trading week!

Research Report Excerpts #1

According to new data from IBM’s U.S. Retail Index, the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years. Department stores, as a result, are seeing significant declines. In the first quarter of 2020, department store sales and those from other “non-essential” retailers declined by 25 percent. This grew to a 75% decline in the second quarter. The report indicates that department store sales are expected to decline by over 60% for the full year. Meanwhile, e-commerce is projected to grow by nearly 20% in 2020.

Research Report Excerpts #2

The acquisition of BA shares a month ago has worked out famously for Finom Group members, as we have discussed and followed the trend higher in our daily, live Trading Room. I believe the opportunity highlighted in October for shares of CAT are similar to that in shares of BA. Let’s look at the chart as of Friday’s close.

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Caterpillar shares have suffered through a long bout of consolidation. The former peak was way back in January of 2018, and before the trade war with China commenced. 

Research Report Excerpts #3

New highs in the market tend to cluster over a span of many years, more than a decade and they verify the market regime. Since 2013, the S&P 500 has been making new all-time highs after making only 1 new high from 2000-2007. The takeaway from this clustering of market highs is indicative of a secular bull market, and one that likely has legs well into the latter part of the decade.”

Research Report Excerpts #4

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I think this is a point that many investors and market watchers often miss. Leverage and sentiment indicators can relieve their extremes, but they are not always a 1:1 correlation with price action. I am not discounting that the probabilities of a drawdown aren’t high, I am simply offering the greatest usage of these types of correlations are best used with respect to investor expectations. For those who sold the S&P 500 two weeks ago, or hedged, when NAAIM was over 106, I would assert that the simpler and more productive exercise was, again, searching out the next outperforming stock and remaining long the market.

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