New market thoughts from Raymond James’ Jeff Saut Investment Strategy: “Melt Up?” 04/17/19

I received a lot of questions about Larry Fink’s (CEO of Blackrock) statement on CNBC yesterday when he said, “I think the risk right now is that we have a melt up in the equity market while everyone is under-invested, not a meltdown.” I also got a lot of questions about my statement that, “In bull markets, most of the surprises come on the upside!” That said, my short-term energy indicator still suggests the equity markets are out of gas on a trading basis and need time to rebuild their energy. As often stated, my long-term energy indicator remains highly bullish. And yesterday was another “stall session” (just like Monday’s session) with the S&P 500 (SPX/2907.06) up a mere 1.48 points. Regrettably, my short-term timing work continues to show the stall should extend for a few more sessions. Accordingly, I would not chase stocks right here, yet longer term, I remain highly bullish despite the chants from a number of pundits I saw on CNBC yesterday stating that the stock market is priced for perfection. In my view, nothing could be further from the truth.
Looking at the longer term, I recently received an excellent report from our friends at Federated titled, “2019 Principals for Successful Long-Term Investing.”
To wit:
1. Plan on living for a long time and save more for it.
2. Cash is not always king, even when, like now, a lot of people are relying on it.
3. Harness the power of dividends and compounding. Investing in risk assets – and reinvesting dividends – can be powerful moves.
4. Avoid emotional biases by sticking to a plan. Don’t let biases – home-country or otherwise – sway your better judgment.
5. Volatility is normal; don’t let it derail you. See through the noise.
6. Diversification works. Time and again, diversification serves its purpose.
7. Staying invested matters. It’s always darkest before the dawn.
Well said!
As for yesterday, Financials (+1.37%) and Energy (+0.64) were the best performing sectors, which is why we have highlighted them for quite some time. Again, as our pal Leon Tuey writes:
Last week, all the A-D Lines closed at record highs along with the QQEW, XLY, & IYR. What bear market? Today, both the DOW A-D Line and the NYSE A-D Line closed at record highs again. Others will be updated later today. As mentioned, the various market indices, too, will post record highs. Also encouraging is that, globally, the financials are breaking out. Clearly, the bull market has resumed. This sector is not only interest-sensitive, but economy-sensitive. Moreover, next to technology, it’s the second biggest weight on the S&P. The breakout augurs well for the equity market.
And then there was this from the astute Lowry’s Research Organization:
The DJIA and S&P 500 staged mediocre rebounds today after yesterday’s nominal sell-off. Up Volume was 57% of total Up/Down Volume, Advancers were 54% of total Advance/Decline Issues and NY Comp. Volume remained light at 3.3 billion shares. Buying Power and Selling Pressure were both unchanged, while the Short Term Index rose one point. With the market seemingly stuck in neutral, a short-term overbought condition and ongoing signs of selective strength continue to suggest elevated near-term risk.
The Turnaround Tuesday attempt was disappointing, especially when an expiration week tends to have upward bias. When the equity markets fell during the final hour yesterday, a “V” shaped rally developed after the S&P 500 traded with a 2900 handle (low of 2900.71). That makes the 2900 an important support level today. Participants want to make Wednesday an upward squeeze on expiry call options. The time for the expiry squeeze is down to two days. The market is closed on Friday. This morning, the preopening S&P 500 futures are better by six points at 5:00.


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