Keeping Our Eye on Stocks as They Keep Going Up
Last week, after stocks jumped on March 17th, we observed:
Not that stocks really appear as good values, mind you. It's just that you'd be a fool to fight a trend. Indeed, the one rather reliable long-term indicator we follow that had signaled the possible start of a deeper correction continues to whip back up at the first sign of distress. And with the Fed's recent comments which gave a verbal nod to increasing rates at the same time talking about the challenges to the economy, thereby indicating that any increase was still just a dream, we continue to find traders and investors reluctant to start seriously trimming their exposure to stocks, even as many continue to talk about how stocks are due for a much more significant correction.
So what to do?
Well, we're not in the business of giving advice in these posts, but we do comment on current conditions, all of which point up, at least for stocks.
And as we said recently, the bond market continues to elude any significant commentary despite the fact that it refuses to continue its recent correction, even as stocks rise. The action in the stock market typically trumps whatever might be percolating with bonds, and this time is no different.
So keeping our eye on stocks as they keep going up makes perfect sense, especially if you hold a significant - let's say more than 20% - weight in stocks. It's quite breathtaking to watch, as long as you don't mind heights.
Technical analysis shows stocks advancing within a long-established channel. And although prices are challenging the lower end of that rising channel, they have not breached support yet. Even if they were to do so, such action might only indicate a more serious correction to the ongoing bull market. The salient point being, simply, that the stock bull market, while long in the tooth, has by no means indicated it's giving up.With the NASDAQ continuing its creep up to the all-time record of 5048 set in 2000, indicators continue to point towards a possible "melt-up." Melt-ups occur when an item gets hot and, because of that, everyone jumps in, driving the price up farther and faster than anyone anticipated. We're not there yet, but each time stocks threaten to widen their recent correction, something occurs that pushes them right back up again.
Not that stocks really appear as good values, mind you. It's just that you'd be a fool to fight a trend. Indeed, the one rather reliable long-term indicator we follow that had signaled the possible start of a deeper correction continues to whip back up at the first sign of distress. And with the Fed's recent comments which gave a verbal nod to increasing rates at the same time talking about the challenges to the economy, thereby indicating that any increase was still just a dream, we continue to find traders and investors reluctant to start seriously trimming their exposure to stocks, even as many continue to talk about how stocks are due for a much more significant correction.
So what to do?
Well, we're not in the business of giving advice in these posts, but we do comment on current conditions, all of which point up, at least for stocks.
And as we said recently, the bond market continues to elude any significant commentary despite the fact that it refuses to continue its recent correction, even as stocks rise. The action in the stock market typically trumps whatever might be percolating with bonds, and this time is no different.
So keeping our eye on stocks as they keep going up makes perfect sense, especially if you hold a significant - let's say more than 20% - weight in stocks. It's quite breathtaking to watch, as long as you don't mind heights.
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