Wednesday, December 18, 2019

Is the market melting up?

Mid-week market update: I am leaving on a seasonal family vacation tomorrow, so posting will be lighter than usual. While the usual weekend publications will continue, tactical market interpretations are problematical this time of year when liquidity is low. However, here are some guidelines on how to think about the stock market for the remainder of 2019.

Recently, there have been more voices calling for a market melt-up. Bloomberg reported that BAML strategist Michael Hartnett called for a SPX target of 3,333 by March 3. Marketwatch also cited bullish forecasts by UBS Global Wealth Management Chief Investment Officer Mark Haefele, and Morgan Stanley's Michael Wilson.

The technical pattern is also starting to look like the melt-up and blow-off top that began in late 2017. The SPX overran rising trend lines (twice) while shrugging off negative RSI divergences. In fact, neither the 5-day nor 14-day RSI flashed any warnings when the market finally topped out in January 2018. Today, the index has rallied above one rising trend line. Compare the late 2017 melt-up behavior with the orderly advance of mid-2018, which never significantly breached the uptrend line. and weakened as RSIs flashed negative divergences. Equally impressive is the NYSE new highs - new lows seen in the current advance.

Is the market melting up?

The full post can be found here.

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