by Ian Harvey
February 17, 2019
The stock markets continue moving on up with the current rally continuing to push through relatively token resistance, with top stocks outperforming.
As the heading “are you going against the tide?” suggests, it appears that there is still a lot-of-legs left to this stock market rally, and it can be an expensive exercise to take a “bear attitude” at this point-of-time. This does not mean that you should be complacent and expect little or no interference to the upward movement; but be prepared to cover the odds of a major market reversal. History shows us that it is nearly impossible to identify the timing of a crisis which will cause a stock market crash, or anticipate exactly where it will be located or how large the losses and spill-overs will be – so really – why worry. Enjoy what is happening now and profit while you can!
At the moment the current stock market rally
continues to move higher. The S&P 500 index cleared its 200-day moving
average last week, with the Nasdaq composite just clearing that long-term
support on Friday. As expected, the
major averages have had a few days of pullbacks and sideways action in the
current stock market rally, but, the Dow Jones and Nasdaq have now logged eight
straight weekly gains.
Top stocks are outperforming in the current stock market rally, with more breaking out, extending runs, or nearing buy points. Earnings reports, so far, have generally been strong while guidance was better than feared. Corporate profits have grown at a more than 16 percent pace in the fourth quarter.
The past week saw President Donald Trump talk about "very productive" China trade talks. President Trump, Chinese President Xi Jinping and other U.S. and Chinese officials expressed optimism that a China trade deal could be reached. And when the trade deal is finally completed, much of the “doom and gloom” of perceived uncertainty and looming recession should dissipate.
As well, the Federal Reserve's about-face on policy in January has also helped lift stocks and keep bond yields low. After its January 30 meeting, the central bank indicated it is not in a hurry to raise interest rates, and that it could slow down the process to reduce its balance sheet. This is more in-keeping with the “bull market view.”
Also, expect continued economic stability in both the U.S. and China.
Capital Ready for Injection…..
There are large amounts of capital are sitting on the sidelines or have been pulled from the markets over the past 12+ months. This means that large amounts of capital that is sitting on the sidelines currently, represents a massive amount of resources that could re-enter the markets when traders/investors decide the timing is right.
Much of this sideline money, when inserted into the market, will cause a certain amount of rotation of stocks. If prepared, this will certainly provide an opportunity to gain potential profits.
So, In Conclusion…..
It appears that the bull market rally that started in 2009 is still intact and is far from completed. Therefore, expect the potential for the stock market, barring an absolute disaster occurring, to continue reaching higher.
Bulls that have bought over the past few weeks have made a smart move by betting that growth slowing would not be 'that bad', and there should be plenty of additional buying power as expectations are still low.
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