The US equities are trying to deal with so much liquidity and an extreme bullish sentiment that we are just sloshing and whooshing. Good for traders. I doubt a change is far in the future. Earnings and outlooks will eventually ground the market to some degree.
Activity is slowing down and continuation patterns proliferate. NDX is more bullish than SPX. SPX sectors are sideways to mild correction except XLK, XLY +/- XLV. It’s time to let 2020 be – sans a new disaster. Enjoy the season and come back to it in 2021.
Momentum declined last week and with net bullish sentiment is not a great setup for further gains short term. The indexes are overbought but not excessively so and appear to be internally correcting. The peak may have coincided with the two IPO’s this week that were extreme. Next market movers: momentum + pandemic + earnings.
Last week was very bullish for stocks. We are reaching the tops of technical ranges but have not yet established extreme overbought conditions, which as we all know can last for long periods especially in raging momentum markets like what we have now. If “raging” was a stock it would be ripe for a correction.
Although it is difficult to make very strong conclusions on a holiday week the market remains very bullish and became more so last week. The healthcare sector has been mildly correcting for a while and underperforming the broader market. Technicals suggest this may change soon. Stay tuned.
We are still mostly in a momentum market and disconnected from actual occurrences. There are a couple very strong market price support mechanisms in play likely limiting downside: Fed policies and progress on vaccines. Whether we rocket higher or not seems not that likely to me, but if the progress on vaccines accelerates, it could happen. Maybe that would give better visibility and an upward bias to healthcare.
The market is bullish by just about any parameter you can put up. This, of course, in the teeth of the new surge in Covid-19 of uncertain impact but not expected to be good. It seems to me we have somewhere between 2 and 6 months before we start seeing real positive impact on the virus by whatever means. And longer for measurable vaccine impact. The markets may or may not care.
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