With the Dow and S&P 500 now back at all-time highs (albeit by the skinniest of margins), and traders apparently following the seasonality play book, the question of the day is, where do we go from here?
The first item of note is that although both of the blue chip indices did in fact close at all-time highs yesterday, neither was able to “break out” above the intraday high-water mark set earlier in the month. In addition, note that the Russell 2000 is now back to within spitting distance of its record high set back in July. And with the NASDAQ and Midcap indices not yet to The Promised Land, the technicians tell us that there is some resistance overhead – and that the bulls still have some work to do if they want to claim that another new up leg has begun.
However, the good news is that the uptrend line that can be drawn from the October and December lows looks fairly healthy and the price action on the weekly chart of the S&P continues to move from the lower left to the upper right. So, while the bulls have been tested a couple times lately, our heroes in horns do appear to have possession of the ball.
S&P 500 – Weekly
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Which brings us back to the question of the day, where do we go from here? The bears argue that momentum has been unimpressive for much of this year and that given the age of the current bull, the move is looking old and tired.
However, it is important to remember that bull markets do not usually die of old age. No, the stock market is really the manifestation of the investing public’s view of the world going forward. And with the economy improving, rates and inflation staying low, earnings at record levels, and the Fed intent on not blowing up the recovery, things look pretty good here in the good ‘ol USofA right now.
So, with both teams apparently having a decent argument, it is probably a good time to check in with our cycle composite in order to get a feeling for what 2015 “might” look like.
David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.