Last week, the S&P 500 dropped half a percentage point. Or was it the week before? At any rate, we can’t get too worried. Our Master Key has lost a little ground, but at 1.06 it remains positive, telling us that stocks are more likely to rise short-term than fall.
We are a somewhat disappointed that small cap stocks have lost a little fire over the past few weeks, but nothing has happened yet that would indicate a sell signal. Meanwhile (you know these words now by heart) … specialist shorting remains historically low, adding support to the market.
One negative that draws our attention is the ongoing bull market in commodities. Last week the CRB Index rose 1.52%, and it looks like it wants to challenge its all-time high of around 350. But fortunately, commodity prices have not been rising steeply enough to cause problems for stocks.
Meanwhile, our other eye remains focused on the bond market. Bond yields have been rising, but not fast enough to outpace commodity prices. That is a good thing, because it means they are not rising fast enough to put the brakes on economic growth. A spike in bond yields, of course, would be a different story – but we’re not there yet.
Overall, therefore, we continue to give the bull market in stocks the benefit of the doubt, and we continue to ride it up.
However, there is another urgent matter, which our third eye (the geopolitical one) is staring down … Read more...
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