That was quite the reaction to the January jobs report. The big
number caught many by surprise but we can now confirm the prior month's
number - perhaps a trend is now in place.
Trends like jobs growth
tend to last long because they are so large - it's like turning around a
cruise ship. Once in the right direction, a full head of steam.
We
have seen a slew of good economic data for months, so this one piece
should really be no surprise. Oh, there are the doubters out there -
that's fine, a 'wall of worry' is healthy.
I recall back in
1999/2000 you could look long and hard for a bear - and it was not
easy. Back then the market was priced for more than perfection - it was
priced for ridiculous, a huge bubble that seemed to make everyone who
participated wealthy. But, we know how that ended. I don't believe we
are at that stage just yet.
Speaking of those go-go days of yesteryear, the Nasdaq hit levels not
seen since those times, an 11-year high (2001). (Where were you back
then?)
The Dow managed to reach levels not seen in four years and
just nipped the 2011 highs. The SPX 500 for its part is still lagging
behind and has not exceed its 2011 highs, nor has the Russell small cap
index.
Markets are overbought, some momentum indicators are
embedded so it may not be too long before they exceed levels. Breadth
has been excellent while sentiment indicators are getting pummeled
(put/call, VIX).
Pullbacks/corrections are a healthy part of a
bullish market trend just as short-covering/buys are good healthy parts
of bearish cycle. So as we have only had one small pullback (that was
bought up on the dip) it would not surprise me to see some giveback over
the next few weeks.
The market structure is strong , bullish and
in force until further notice. The VIX shows some complacency here but
until sentiment turns then stay with the trend.
Taking a view of
the chart and technicals, we notice the strong rally from the lows in
October and dips in November/December. Since just prior to the Santa
Claus Rally markets have been rolling higher in one direction.
Notice
the crossover of the 50/200 (which is the golden cross, spoken about
last week) which offers some major support. The Nasdaq chart is similar
but provides support at a much lower level (the RS is notable here).
February
is off to a good start but let's be clear - this cannot continue at
this pace and coming in some would set up the next move higher. The
longer we go without a dip the more treacherous it gets.
Hard to believe I wrote an entire article without mentioning Europe, US politics, China or the election. Times can change.
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