Stocks End Mixed To Mostly Higher As Small Caps Lag

Stocks ended mixed to mostly higher for a sixth straight week, literally every week Trump has been in office. Small caps lagged and ended lower which is a sign of near term fatigue. Remember, markets do not go straight up. At this point, it is perfectly normal to see the market pause and digest the recent and very strong rally. Under the surface, not much as changed. The more we scan the market and look at leading stocks, sectors and industry groups, the more this feels like the very early stages of a 1999/1929 style climax/blow-off top. Of course, we are open for any possible scenario that may unfold but, for now, we are in a very strong bull market and weakness should be bought, not sold. The strength is broad based as big money continues to flow into the major indices and several important sectors: Financials ($XLF), Materials ($XLB), Industrials ($XLI), Steel ($SLX), and Technology, just to name a few. As long as pullbacks remain very shallow in both size (small % decline) and scope (short in duration), the bulls remain in clear control of this market. The first level of support to watch is 10 day moving average, then the 21 DMA, then the 50 DMA for the major indices.

Mon-Wed Action:

Thur & Fri Action:

Stocks fell on Thursday as the market finally pulled back from deeply overbought conditions. Snap — the parent company for social media platform Snapchat — finally IPO’d and its stock jumped over 40% from the IPO price of $17 a share. Separately, Attorney General Sessions said he will recuse himself from investigations related to Trump’s campaign and Russia. Separately, Caterpillar’s stock fell after a few government agencies raided three of its offices. Stocks were very quiet on Friday after Yellen left the door open for a rate hike in March.

Market Outlook: Strong Action Continues

The market remains strong as the major indices continue to hit fresh record highs. The bulls have a very strong fundamental backdrop of monetary and now fiscal policy. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, which, historically, is still very low. On the fiscal side, Trump’s pro-growth policies are received well. As always, keep your losses small and never argue with the tape.  Schedule a complimentary appointment today –  Do You Feel Alone In The Market? There Is A Better Way: Learn More