Here’s a look at the broader market, and why I think today’s price action is so important. (June 01, 2017)
IWM SP-500 DJ-30 COMPQX IWM MDY IWM SP-500 MDY IWM
In this chart video, it is kind of a typical thing that I would put at the front of a Strategy Session, but it just seems to me it is important enough that I want to just share my thoughts with everyone, a paying member or not. I think this is an important day and you see it all over the headlines, “Oh S&P ( INDEXSP:.INX ) and Dow ( INDEX:DJI ) make a new high and this and that and the other thing. And that is all good stuff, but this is what is interesting to me: The small-caps ( NYSEARCA:IWM ), which had kind of had been lagging. The S&P ( INDEXSP:.INX ) up, the Dow ( INDEX:DJI ) up, certainly the NASDAQ ( COMPQX ) up big time. You are looking at the MidCaps ( NYSEARCA:MDY ) and the SmallCaps ( NYSEARCA:IWM ) and they are just kind of sluggish, not really doing much.
Well today that kind of changed. Here ( NYSEARCA:MDY ), up 1.6. The IWM ( NYSEARCA:IWM ) up almost 2 percent. So I am looking at this and I am seeing it is the first of the month, so money is coming in and it is being put to work. We also had some good ADP jobs numbers this morning, which is the precursor to the May jobs report, which I believe we get tomorrow. Man those guys work fast. first Friday of the month, right? So I think the market is expecting strong employment. Of course that lends credence to the whole Trump rally, economic growth, etcetera, etcetera. All that stuff. So we have get a lot of good things happening here in the market. I don’t think the whole climate deal has any influence on the market whatsoever; it is getting a lot of headlines.
I was watching the S&P ( INDEXSP:.INX ) when this was announced. It means something to Elon Musk and to everybody else who is an international global want to be, but it really didn’t have any impact on the markets. So I don’t really care about that. What I do care about though, seriously, is the MidCaps ( NYSEARCA:MDY ) and the SmallCaps ( NYSEARCA:IWM ), I think it is important, it is a positive development. But one other thing is, there was a guy on CNBC after the close, I forget his name, seemed like a really sharp guy. He said something that really perked up my ears. He said, “The market shouldn’t be up as much as it is.” Then they are talking about other things and the guy was asked, “How do you feel about the market?” and he kind of nailed it. He said, “Well, I am really bullish for now because the market is going higher.” And that is the right way to look at it.
But his point about the market shouldn’t be up as much as it is, guys and ladies, that is the wall of worry. That is the whole idea of why bull markets climb a wall of worry. Because it is always up more than it should be. That is what causes money to come out of the market or at least not get put in. And then stocks continue to rise and some to that rising is because of the guy, and lets face it, the entire market is made up of a bunch of individual people, a bunch of individual investors. They didn’t put their money in because they were waiting for a pullback. Then the pullback doesn’t come and money gets put back into the market and that pushes prices higher. That is just the way financial markets work, they have always worked that way.
So when I hear the market shouldn’t be up as much as it is I think, “Well for cryin’ out loud, now we are definitely going higher. Because the guy said it and he is absolutely right, the market shouldn’t be up as much as it is.” But it is going to go higher because it shouldn’t be doing that. The Trump rally is over. The market is overbought. It is the most expensive that is has ever been. Well, if you look at what happened back in the dog days of the last century you will see, right here, the market shouldn’t have been up as much as it was and it just kept going, and going, and going. All this time the market shouldn’t have been up as much as it was. And finally in 2000, at some magical moment in time, which will not be repeated tomorrow, but at some magical moment in time the market rolled over and then we crashed.
Same thing here, the market shouldn’t be up as much as it is. Shouldn’t be up as much as it is until finally the market agrees and it crashes. What I am saying is, the most money, just kind of as a general proposition, the most money is made right before the most money is lost. We get a nice little acceleration here and then, Boom! it’s lost. So don’t forget to participate in this part, where the most money is made. And just make sure you are covering your risk. You are managing it with stops, not nursing losing positions and stuff like that. Make sure that you are managing that and then you are not going to get hurt too badly when the market rolls over. We have been waiting for the market to roll over for a long, long time and it just hasn’t happened.
If we look at the weekly chart here you will see, I have been talking about this for a couple of years really, this inverse head and shoulder pattern in the market. Nice big move up and then we get this sideways consolidation here. And then finally a breakout. So the we just have to extend this up, you know, take the distance from here, add it to here. And what I am telling you is, we are just going higher. So you want to be long this market. Again, the MidCaps ( NYSEARCA:MDY ), the SmallCaps ( NYSEARCA:IWM ), these are in really, really good shape in order to move higher. So I want you to be there.
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