DJIA: 42,299

You can’t always get what you want… but if you try, you just might find you get what you need. We don’t usually think of the Rolling Stones at a time like this, but we pretty much agree with the concept here.  The 10% correction didn’t end in much of a washout, so the numbers a week or so ago didn’t exactly match those of prior lows.  Stocks above their 200-day only fell to 32% versus a preferred level of 20% or less, and the VIX or fear index as it is called, barely budged. Yet there seemed considerable fear. The Investors Intelligence survey recently showed more bears than bulls, the first negative reading in a year. When mildly negative as it is now, annualized returns are quite positive. Then, too, you might say this is a survey of market letter writers and what do they know? We couldn’t agree more.

Surveys like investors intelligence never have been our favorite measure of sentiment or investor psychology. Sentiment itself is never a timing tool, but when it comes to sentiment, we prefer what investors or traders are actually doing, rather than just what they say they are saying.  In almost any social gathering people might say they are bearish, ask if they own stocks and they invariably say yes. That is not being bearish.   Put buying, the Put/Call ratios are useful as a measure of sentiment, though Put buying can be just a hedge. Equity only P/Cs, however, have done an excellent job over the last year.   They are now at their highest level over that span. Over time we have noticed some indicators work in some markets and not others, and vice versa. An Interesting point here, everyone looks at the VIX, few at the equity only P/Cs.

They say 5 will get you 10, in this case 10 may yet get you 20. If the 10% drawdown is about to morph into 20%, it should be happening soon.  Meanwhile 10% only declines don’t look back.  If 10% was it, how far can the rally carry? Recognizing turning points is one thing, how far they may go is quite another. Robert Prechter was good at it, the rest of us not so much, not that most don’t try. We find the answer is always when things change – a peak in stocks above their 200-day, a low level in the VIX and disappearing put buying. Where this recovery ends is hard to say, when is about the indicators. Part of it, too, of course, is about the average stock, the advance/decline numbers. Even if it is no longer the leadership, you don’t want to see Tech falling as it did Wednesday.

Although there was not a washout sort of low, arguably many Techs came close. Typically, at market lows those down the most turn up the most, simply by virtue of a rubber band sort of effect. Tech hasn’t fared too well since then, leaving their leadership somewhat in doubt. Leaders or not their participation is important – a house divided, and all that. Meanwhile, what you might call retro tech names like IBM (246) and Cisco (61) have held together well, as have names like McDonald’s (313), Fastenal (78) and GE (206). Most find insurance stocks boring, which is to say making money is boring – IAK (137) is the ETF there. Precious metals have good reasons to rally, energy not so much.  Don’t tell that to Chevron (167) and Exxon (118).

Market lows are made when the selling is out of the way. Wednesday didn’t exactly have that look, Thursday was a bit better to damn with faint praise. These are only two days of course, and we’re still well above the recent lows. This seems important since if we fall back again to the 10% correction level, the next 10% could come quickly. We are surprised and disappointed that the market continues to react to tariff news. Good markets don’t typically keep discounting the same bad news. How the market reacts to the likely bad news this weekend could be insightful. When Russia actually invaded Ukraine, the market rallied, the bad news has been priced in. Much like then, a rally on bad news would be a positive change.

Frank D. Gretz

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DJIA: 41,953

If they don’t go down … it’s likely they will go up. Actually, that’s a bit more profound than it would seem. A 10% correction was in place last Thursday, the technical backdrop for a turn was not. Stocks above their 200-day average on the NYSE had only reached 32%, versus a more significant level of 20%. As we all know, life in the stock market isn’t about perfection, sometimes you get what you need. One plus we haven’t looked for was a spike in the equity only P/Cs to a level in keeping with that of recent previous turning points. So, will 10% do it, or did 10% start it? In the most simple terms, both the 10% only and 10% plus lows have sharp initial rebounds. The 10% only corrections pretty much don’t look back. The 10% plus corrections give up their gains relatively quickly.

If at their start both the good and bad rallies look similar, there’s little to distinguish them other than their longevity. However, there may be a couple of things worth noting. Last Thursday’s selloff marked a 10% decline in the S&P, as well as a five-month low.  It was followed by a 2% rally on Friday, a specific pattern that has in the past led to higher prices. A more subjective positive of late has been the trading in stocks like IBM (243), McDonald’s (307), GE (204) and Deere (477). Certainly a diverse group, and not the Tech names like Nvidia (119) where most of the focus lies. The former, however, are important stocks which could lead as Tech continues to struggle. The patterns here are a bit strange in that they spiked up recently only to give up the strength in last week’s selloff. Then, too, the strong stocks usually get hit at the end of declines.

Aside from the stocks above, other areas that look attractive include Insurance, companies in our experience that find a way of turning pain, including their own, into gain. Then, too, Insurance stocks are not exactly Nvidia. You’re not going to go to your friends bragging about your Insurance stocks – maybe AJ Gallagher (335) if they’re Irish.  Sometimes you just have to ask yourself, do you want to be cool or do you want to make money?  The short-term patterns are fine, and the pull back Wednesday in Progressive (275) leaves them a little less stretched. For those with an investment versus a short-term perspective, the monthly charts are what we call sleep at night patterns. These are the sort of patterns where you not only don’t fear weakness, if you have cash you hope for it.

Then there is Gold.  Up a lot you might say, but that’s what they said about every big move half the way up. In this case, despite Gold’s stellar performance, the Gold/SPX ratio is once again just crossing an esoteric moving average which in the past has led to higher prices still.  And then there’s China, until just recently termed uninvestable – a term worthy of a Business Week cover. The bear market there seems over, Tech is no longer the political bad guy, DeepSeek and instant battery charging have renewed attention. Most important here seems the washout, as per our proposed cover story. And money seems leaking out of the US for now, for better performance elsewhere including China. Tariffs somehow seem more of a worry for us than for them.

As usual, there are a few possible outcomes here. One not much thought of is a decent recovery, but one without Tech. Speaking on behalf of the charts, this seems a real possibility. You can summon the witches of the deep, but we’ve noticed they don’t always respond. Perhaps Nvidia and the rest of Tech have stopped going down, but could fail to respond, at least as leaders. To the fore could be the stocks outlined above, or stranger still, have you looked at Exxon (116) or Chevron (165) lately?  As for the market, it’s a case of time will tell. Important again is the average stock, daily advancing versus declining issues. The pattern is almost surprisingly good in that there are bad days, but no bad up days – up in the Averages with poor A/Ds. We wouldn’t want to see that change.

Frank D. Gretz

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This week there will be no regular market letter.  Instead, please find a few thoughts from Frank on the recent action.

It’s not about where or when … it’s about the selling. Sellers, not buyers make lows. The selling is done, not based on the misused term oversold, but when markets are sold out. The percentage of stocks above their 200-day moving average is an indicator with a long history. Over time it has consistently fluctuated between 70% or more at market peaks, to 20% or less at market lows.  Just below 40% earlier this week, it’s hard to call this market sold out. This also seems unlikely based on the lack of a spike in the VIX, which would have indicated a give-up sort of phase. Meanwhile, the S&P is approaching the garden variety correction number of 10%, and the average S&P stock is down 20% – tech stocks of course much more. There was little special in Wednesday’s market numbers, and no follow through Thursday. Still, even bear markets have their counter trend respites.

It’s important to remember stocks are not companies, and what affects stocks often has nothing to do with those companies. We are thinking here of a company like Netflix (890), seemingly doing well and importantly these days, one untouched by the political drama of tariffs.  Yet the stock is off some 15% from its peak and broke the 50-day just this week. Part of the problem is that it’s a weak market, and studies suggest 70-80% of the movement in any stock is a function of the overall market trend. Often more important these days are the ETFs which concentrate on areas like AI, the MAG 7 and in this case FANG stocks. When one of these ETFs is bought or sold, each stock is affected regardless of the company’s merits, good or bad. This was all well and good on the way up, not so good now.

Frank Gretz

DJIA: 44,176

It’s the market that makes the news … thank goodness. Tariffs now seem almost a common event, DeepSeek has threatened the market’s most prized stock, Nvidia (140) and AI itself. The government is in chaos and so too governments around the world in this new fend for yourself environment. There have been a few downdrafts including Thursday’s – the others have proven brief, leaving one to question how the market has held together as it has. An impromptu answer would seem you have to know markets. They hear a different drummer, the one of supply and demand. The market hasn’t gone down so far apparently because its not ready to go down, this despite multiple opportunities.  You can learn a lot about markets by what they do, and sometimes you can learn a lot about markets by what they fail to do.

The market has been in a trading range on two fronts. The first and most important, the level of stocks above the 200-day average has ranged between 50 and 60%. As this measure pretty much defines a stock’s trend, it’s more than a little disconcerting to see the S&P at a new high, while almost half of NYSE stocks remain in downtrends. This kind of divergence typically ends badly. On the positive side, rather than continue to drop from 70% to a more typical 20 – 30%, the mid-50s has held.  The second aspect of the trading range obviously has been the S&P, which for the second time in the last two months finds itself trying to break out. Historically these trading ranges, when within 5% of a high, have positive outcomes more than 70% of the time, according to SentimenTrader.com.

It’s interesting that A/Ds have steadily improved, always important, and yet the improvement hasn’t been enough to push more stocks above their 200-day. Our suspicion is that it’s likely due to the underperformance of most commodities, and even the dichotomy within Tech. Not that long ago Software led, and Semis lagged, now it is pretty much the opposite. Meanwhile, there may be a light at the end of the tunnel for commodities, the light being China. China is the world’s largest consumer of copper, and if copper goes the rest usually follow. The Hang Seng has seen 60% of its components move above their 50-day average, and 8% of shares reach a12-month high. Both typically lead to higher prices.

An ETF we’ve come back to recently is Momentum Factor (MTUM – 225), which recently made a new high. It is dynamic in the sense there is a formula for adjustment, and at least for this market the top 10 holdings seem a bit of genius. The success here seems not just about winning stocks, but its peculiar diversification. Indeed, who or what AI program would own both Palantir (106) and Philip Morris (152)? When it comes to the latter, you might ask if they got the symbol wrong, but not when you look at the chart. And then there’s JP Morgan (267), one of the best of the much needed Financials, given this market’s propensity to switch between Financials and Tech.

It’s a bull market but a strange one, not one that leaves you feeling all warm and cuddly. Slamming Palantir Wednesday, arguably the leading AI stock, and Walmart (97) Thursday may be part of it. For Palantir, the weakness is a flesh wound, but the leader of your cult is not supposed to be selling, though he sold almost the same amount last year. For Walmart it has been so long since it has taken a hit most have forgotten it happens. It’s on the 50-day, which has held for quite a while, and if you need further consoling, look at a monthly chart. In both cases, however, they didn’t exactly ignore bad news. Meanwhile, Gold doesn’t quit, once again Bullion (GLD – 271) more than the Miners (GDX – 42). Farmers have been hurting and killing USAid makes things worse. Yet Deere (496) acts well!.

Frank D. Gretz

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DJIA: 44,747

It’s a house divided … but still standing. From the Bible to Abe Lincoln, to basic technical analysis, divided is not a good thing. The divide is most clear in a simple indicator, the percent of stocks above their 200-day average. The idea of 200-days versus the often used 50-days is that it gives you a perspective of an overall rather than short-term trend. Depending on your database, the S&P has trended higher while NYSE stocks above their 200 are close to 50–50. Of course everything is relative, among other things it’s all relative to what the large-cap averages are doing. It’s a house divided. Another take here is a look at what small and mid-cap stocks are doing, as well as the Equal Weight S&P.

The other important factor in looking at stocks above the 200-day is the direction itself. We have mentioned that there is a rule of sorts that when the number drops below 60% it continues to around 20% before regaining the 60% level. There is a logic here that when markets lose momentum it’s not typically regained without a correction to rebuild the liquidity. Obviously talking about rules in the stock market is bit of a stretch. Over the last few weeks the number has been stable, and we’ve come to think it could simply remain that way. After all, Tech has had a good run and deserves a consolidation.  Meanwhile, Financials and Healthcare could very well pick up the slack, leaving the market itself in a technical standoff of sorts.

Adding to the idea of stability rather than correction is that there are strong stocks. Call us old fashion, but when we see stocks like GE (206) and IBM (253) breaking out, we can’t help but think how bad can things be? And Disney (112), even the mouse tried to escape Wednesday with only dubious success, but is in any event a much better chart these days. The real lift for the market, however, seems the financials. Visa (347) and Mastercard (567) are hovering around highs, American Express (318) seems poised to do the same. Particularly attractive are the broker-dealers, an ETF here is IAI (158). This runs from exchanges to Fintech, Goldman (658), and so on.

The China charts are much improved, and BABA (100) even more than that. Meanwhile, we have thought to avoid Starbucks (112) because of China, but it’s hard to avoid that chart. Among the FANGs, Google (193) has gone from first to worst short-term, but even there is sitting on its 50-day average. By way of overall perspective, we’ve used a monthly rather than a daily chart of the stock making clear it can withstand this weakness and more, not that we’re anticipating that. Speaking of avoiding problems, streaming seems likely to avoid tariffs.  Netflix (1016) gapped higher a couple weeks ago, and the stock has a positive history when it comes to following through to this pattern.

Markets are never easy. Then, too, a smart guy once told us this is the best game in town. So here is one of those times that is vaguely positive, that is short-term, against an overall imperfect backdrop. It’s amusing to consider that’s how markets get you. There’s always one more trade to be squeezed out. Then, too, we trade more than invest – we have no qualms being gone tomorrow. For investors, look for long-term growth, something like garbage. Sure we’re mocking garbage as growth, but we’re not mocking garbage stocks as growth stocks. Just look at those long-term charts – the short-term charts aren’t bad either. The three we are familiar with are very similar, Waste Management (226), Waste Connections (189), and Republic Services (222).  It’s about making money, not so much how you make the money.

Frank D. Gretz

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DJIA: 43,153

The problem for stocks of late … bonds. Graphically, TLT (87) and IEF (92), the 10-year and 30-year pretty much tell the story. Long rates are moving higher, and they have been doing so for a while. Long rates of course affect borrowing costs at many levels, including mortgages. From a stock market perspective, they affect REITs, Regional Banks, Home Builders and the related stocks, basically a bunch of stocks, and therefore numbers like the A/Ds and stocks above the various moving averages. Technically, the yield on the 10-year is at a one-year high, and is also at the top of its three-year range. Against that background the S&P has moved lower for the most part over the next several months, according to SentimenTrader.com.

Long rates impact a multitude of stocks which in turn affect many aspects of the technical background. The Advance Decline Index, for example, peaked at the end of November. Meanwhile, the big cap averages have been hovering around their highs, leaving the kind of mechanical divergence that typically leads to weakness. This is all about a gradual loss of momentum. Where it shows most clearly is an indicator like the number of stocks above their 200-day average. This measure has a typical range between 20% and 80%. Above 70% indicates enough strength that it tends to persist – momentum takes time to unwind. Once it does begin to unwind, however, it typically continues to the other extreme. The number currently is in the low 40s. The rule, so to speak, is a drop below 60 brings a level of 20 before a new uptrend begins.

A long, long time ago, maybe six months, concerns arose over the strength of the economy. At the time and pretty much since, we have been on the side that these are pretty much unfounded. This has been based not so much on our profound knowledge of economics, rather our observation of the many stocks we find sensitive to economic activity. Parker Hannifin (659) would be one of these, a stock Greenspan used as an economic indicator. Then there’s Grainger (1110), with a division named “endless assortment,” and, of course Cintas (198), where would we be without clean uniforms. The list goes on to include names like Fastenal (75), whose business is fasteners, more commonly known as nuts and bolts. The charts here all are long-term uptrends and certainly not terrible. They have, however, begun to teeter a bit – something to keep in mind.

The idea “show me the money” recently came up in regard to AI, can you imagine? It also seems to be rearing its ugly head when it comes to weight loss. For the second quarter in a row, Eli Lilly (758) has been the latest to disappoint investors, as revenues fell short of estimates. Its 7% drop was the worst since 2023 and brought the Healthcare Index with it. The market’s response seems a growing frustration with the company’s inability to turn promise into cash. Bloomberg’s John Authers also points out the sector accounts for 20% of GDP and is experiencing double-digit inflation, making it difficult for the Fed to achieve its targets. Meanwhile, have you noticed how poorly many beverage and package food stocks behave, a possible side effect of these drugs.

The market has had a spate of good news recently. Bank earnings were positive and treated as though they were for this quarter rather than the last quarter. Inflation numbers were subdued but is that really a surprise or the market’s real worry these days. We could argue the news is dubious good news, but the market reaction so far is anything but dubious. And that’s what counts. When we say the market makes the news, it works both ways – it’s the market reaction to the news is what counts. If the stock market’s problem has been bonds, Wednesday’s spike was encouraging and perhaps overdue, but it’s about follow-through. The mistake made last time is that when the Fed lowers interest rates, bond prices improve. As we’ve come to learn, long-term rates are almost entirely determined by the market itself.  Meanwhile, history suggests a propensity for bond weakness early in the year, especially when the trend already is down.

Frank D. Gretz

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DJIA: 42,342

Seems like old times … 2000 maybe? The market that year was great while it lasted, or should we say while the dot-coms lasted.  It was a market so divided they gave names to both segments – new economy and old economy. It was a market so selective you knew where you wanted to be, or should we say had to be to make money. We may not be quite there yet, and perhaps this market can pull itself together. But this is clearly more than your typical mid-December lull. NYSE A/Ds have been negative 9 of 10 days. For the S&P components, they even missed that up day!  This against the backdrop of decent strength in the Averages, including a recent high in the NAZ. Divergences like these never end well, though their end is more than a little elusive.

Divergences come in all sizes, which is to say length. A few years ago, 2018 as we recall, at the end of October there were three consecutive days of higher highs in the Dow and negative A/Ds. By the end of December the market had dropped 20%, despite the favorable December seasonality. Then there was the ‘87 crash in October, where leading up to it divergences had begun in May, only to worsen by October. By then, of course, most had come to believe the divergences didn’t matter. Most similar now, however, seems the dot-com period in 2000, the Mag 7 now filling a similar role. Just as the dot-coms dominated the NAZ then, so too have the Mag Seven done so now. Throw in this time the speculation in Bitcoin, and even worse the extremes in quantum stocks, it gets easier to say it’s 2000 again.

Bubble, no bubble, semantics don’t matter. There’s often a bubble somewhere, bubbles are not the problem. The problem is when bubble stocks are going up pretty much to the exclusion of everything else. In a way they are the lazy traders dream – you don’t have to look too hard for what is working, they are hard to miss. Narrow markets don’t often re-expand, especially those with a bubble tinge. Then, too, Decembers are often an analytical enigma.  For now the Round Hill Magnificent 7 ETF (MAGS-56), with just those stocks makes sense. The “493” isn’t all bad, but even the good charts are pretty much dormant. When this changes of course you’ll see it in those A/D numbers.

Obviously we favor the MAG 7. To those we would add several software shares which are holding reasonably well, namely ServiceNow (1075) and Salesforce (336). Semis, however, still seem a work in progress. And they are important in that we don’t recall many good markets without their participation. Some have even referred to them as the new Transports, suggesting Semis should confirm the Averages as Transports should confirm the industrials under the Dow Theory. There was Broadcom (218) this week, but then too there was Micron (87).  Possibly encouraging is the incipient turn in ASML (710) – above its 10 and 50-day averages. Among the Semis, this one could be predictive.

The A/D numbers have been particularly poor of late, not to the tune of Wednesday’s drubbing but hey, you never know. Blame Powell if you like, but economic growth seems more important than the next rate cut – there the story seems intact. And Powell is just trying to get ahead of possibly needing to raise rates in a Trump administration. The Fed is an excuse for what markets always do – they make the news. As much as the degree of the decline the idea of pretty much getting into everything in just one day has the look of wash out, and there was a spike in the VIX. Then, too, days like Wednesday are not typically one-ofs.

Frank D. Gretz

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DJIA: 44,765

Bullish … who isn’t? Sure that’s a worry but for now we wouldn’t get caught up playing contrarian.  One of our favorite quips here is that investors are wrong at the extremes, but right in between. The evidence says we’re in between. The evidence says higher. Part of the evidence is the time of year. History says higher pretty much between now and early January. Importantly, backing the seasonal pattern is the technical evidence – positive A/Ds, 70% of stocks above their 200-day, and so on. At an anecdotal level, you have to be impressed too with the market’s lack of reaction to tariff threats, an excuse to selloff were the market so inclined.

Also pointing to higher prices is the often-maligned VIX or Volatility Index.  Since its inception in 1990 the VIX average close is 19.5. There was a significant surge during the summer which saw the Index hit an intraday high of 65, but it since has settled into a range between 14 and 23 as events like the election have kept the number elevated. It closed last week below 14 which, following a drop from above 20, has proven significant, producing positive returns for the S&P.  Additionally, there is a measure called the last hour indicator which as the name suggests, measures the S&P only in the final hour of trading. The logic here is that professionals trade/invest in the last hour, making the action important. It was recently positive 9 of 10 sessions, which historically has led to higher prices, according to SentimenTrader.com.

If the MAG 7 were their own market, they apparently would be the world’s second largest next only to the US. Certainly impressive, but not necessarily an insight into where they’re going. Until very recently the market had been led primarily by financials and secondary stocks, demonstrated by the Russell 2000 or the Equal Weight S&P and NASDAQ 100. This seems to be changing, not necessarily to the detriment of those areas, but certainly to the benefit of much though not all of Tech. Software shares have performed well for some time, aided recently by the gaps higher in Salesforce and ServiceNow. The change is also evident in the MAG 7, which obviously benefits the weighted averages versus the unweighted. Semiconductor shares for the most part still have something to prove.

We came upon Marvel (113) last weekend thanks to football. Watching some of those games we wonder if God didn’t create football just as an opportunity to go through the charts. Charts, by the way, are a good example of how mechanical technical analysis can be — support, resistance, trendlines, and so on.  Art may be too strong a word, but there is a subtle side to this analysis of supply and demand. In the case of MRVL last weekend, it wasn’t the good chart per se, it was the good chart amongst the preponderance of bad charts in that semiconductor group. It’s that failure to fail idea. You can also think about this in terms of the market as a whole. Bad news, bad numbers, war, whatever, and the market fails to go down — that tells you something. Or, war in the Middle East and oil fails to go up. In any event, football can be profitable.

Wednesday’s was a good market, a good market overall but particularly in the market averages. Yet A/Ds barely turned positive at the close, having been negative most of the day. This clearly seems about what we spoke of last time, the broad groups of energy and financials failing to show. As much as we focus on participation this doesn’t seem an issue, rather a reflection of the recent shift to Tech. Shifting rather than losing participation seems the important point here.   Tech is a broad group but not quite as homogeneous as Financials. Powell’s economic comments on Wednesday were surprisingly positive, something Parker Hannifin (695) and Grainger (1189) have been saying for a while. Friday’s jobs number shouldn’t be an issue even if bad, but could offer another insight to the market’s health.

Frank D. Gretz

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DJIA: 43,750

So far so good for Trump 2.0 … but can these knee-jerk reactions be trusted? Specifically, are knee-jerk reactions to elections to be trusted? The answer, of course, it depends. Interestingly, it’s the character of the reaction that’s important, the rally in stocks being only a part of it. Gold has been almost surprisingly weak, but based on history that has been positive – strong Gold has been associated with poor returns. Other positive elements include the strong dollar and the decent A/Ds. The rally so far has seen simultaneous all-time highs in what can be called the cyclical areas of discretionary stocks, Industrials, Financials, and Tech. Strength in these areas has lead to positive future returns.

Not all of Tech is being treated equally, at least when it comes to Software and the Semis. The latter is apparently being viewed as a Biden legacy – the Chips Act.  This likely will change, but unlikely to the detriment of Software.  We have always thought that someplace along the line there would be a speculative blowoff of sorts, and we suppose Bitcoin is threatening. Quantum computing stocks, many of which are low priced, also seem on the move. IONQ (26), where the company and the symbol are the same, also has been strong. And then there are the power companies like Talen (203), which just reported a good number, and Vistra (139). Like AI and data centers there are associated companies here like Nuscale (25) that builds the small reactors. Meanwhile, while still a good chart, we wonder how many Democrats will be Tesla (311) buyers.

Could Gold and Bitcoin actually be the same? Ever notice you never see Superman and Clark Kent together? Similarly, you never seem to see Bitcoin and Gold go together.  As much as they try, Gold and what drives it is hard to explain. It’s said Gold is an inflation hedge, yet in 1929 and after it proved a hedge against deflation. Similarly, Gold has ignored many opportunities to rally in times of trouble, even panic. It seems to cycle in a timeframe unknown to mere mortals. What is troubling Gold now seems the dollar strength, but who knows – correlation doesn’t mean causation. Or maybe the trouble with Gold recently is Bitcoin and its success.  Gold on this pullback looks attractive, as does Bitcoin.

To borrow from the Graduate, the word is garbage. More tastefully, Waste Management (222), Waste Connection (184), and Republic Resources (209). No tariffs, no supply chain problems, plenty of demand and excellent charts, what’s not to like.  They also fit the category of what we call long-term uptrends, with decent short-term patterns. The obvious advantage for these stocks in long-term uptrends is having the proverbial wind at their back. And there’s reason for these patterns – a franchise, superior management, whatever. People like to say they’re long-term investors, yet they end up buying stocks in long-term trading ranges. Among other stocks in this category are the often-mentioned Cintas (217), Grainger (1176), and Parker Hannifin (698). Back on track also seem Accenture (370) and McKesson (625).

So what could come undone? For stocks, as always it’s about the average stock, the A/Ds and stocks above their 200-day, not the Averages. All fine for now and not to look for trouble, but what might change? For stocks, that could be bonds, which already seem a worry. Rates surged on the election results on the fear of what tax cuts and tariffs would mean for inflation. They since have settled but they are important together with the A/Ds.  To curb too much enthusiasm you might consider this. The two markets have nothing in common, so for now it’s just coincidence it, but at this very early stage this market is tracking the very early Hoover Post-Election market in 1928.

Frank D. Gretz

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DJIA: 43,729

Trump rally … or relief rally? As important as the election’s outcome, it might well be there is one.  For now there are the winners, the Trump trades, and there are losers, but for how long is for now? The nice thing here is it seems another time when you get to figure things out – the time for predicting is over and now is the time for observing. Does a 5% overnight move in the Russell make sense? Is the Solar industry and the rest of renewables going away? Or are they the real opportunity here? And why sell Gold because the dollar is higher?  Won’t be long before inflation is higher as well. For sure there is a surprise here, testament to which are the boarded windows in DC.

Despite what some had thought, a Trump rally apparently was not priced in. Perhaps more to the point, any rally was not priced in. Last month’s quietly down-market helped set the stage for this rally, though its extent of course has been a surprise. It has gotten many indicators stretched in a hurry, but good markets do get overbought and stay overbought. At the very least, they don’t turn on a dime. Where you’re in is often more important than whether you’re in, and even at this early stage the rally seems to be following the historical script. Small Caps have done best during the first three months after an election, and Value best in the next three months. That said, three stocks in long-term uptrends we’ve often mentioned were strong on Wednesday – Cintas (220), Grainger (1189) and Parker Hannifin (690).

On a day like Wednesday the losers stood out. The winners, or potential leaders, were more difficult to discern against the overwhelming strength. And in some cases, you have to wonder about that strength. One clear distinction was domestic versus international exposure, the former clearly outperforming.   Still, is every Regional Bank about to merge or be free of regulations.  Or are we never using toothpaste or washing clothes? While a great company, was Nucor (161) really worth 20% more on Wednesday than the day before? And when it comes to Tesla (297), his politics should help SpaceX, but probably not sell more cars. On a technical level, the blowout move in the Averages didn’t quite see the same move in the A/Ds – not important for now, but something to watch.

It’s the most wonderful time of the year.  No not Christmas, for the stock market the most wonderful time is between now and the end of April. Since 1945 $1 invested in the S&P during this period is now worth $125.  That entails a 76% win rate and a median return of 10%. Gains of 15% occurred 16 times while losses of 15% only twice, according to SentimenTrader.com. Making this all the more striking are the returns for the other six months, when $1 turned into just $2.75. These numbers make it sound a bit easier than it is – even good markets don’t go straight up; they often move in chunks. Little question, however, it’s a good time to be invested.

It seems a lifetime ago, but last month wasn’t a particularly good one. It was the first down month after five straight up. A/D numbers saw pretty much as many up days as down, and particularly weak were the level of new highs versus new lows – virtually flat on the NAZ. The weakness overall, however, was pretty much relegated to short-term time frames.  Stocks above a 40-day moving average, for example, dropped from 64% to 38%, while those above their 200-day remained above a healthy 60% level.  Important now is that we see a reset in these numbers to go with its renewed strength in the Averages. The end to five-month win streaks by the way, does not bode ill historically.

Frank D. Gretz

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