The market uptrend holds but the current rally is showing some signs of maturing, with nearly all averages holding at just-achieved record highs.
Indicator charts remain bullish but also show movement to their prior overbought top levels. That points to increased risk. While overbought conditions can hold, the next major move on the oscillators will have to be lower. The timing of any downturn is not yet determined but it would be prudent to increase stops in the meantime.
Market Drivers
Early Friday, the Labor Department reported 175,000 non-farm jobs were created in February, well above the forecast of 152,000. There was also an upward revision of the January reading. Together, that much-improved data should allow the Fed to continue its plan to slowly unwind its monthly asset purchases.
That suggests stronger economic growth this spring, with increased consumer spending widely mentioned after the horrible winter [weather] kept many Americans home. Whispers of some inflation are also heard with expectations for some higher rates.
Technical Outlook
Friday’s mixed final readings raise some worries. Again initial gains failed to hold, and this time it occurred in the face of good economic news. That may excite the public but professionals note the recent strong market advance and see overbought conditions and chances rising for another setback to provide some relief.
Most oscillating charts are at or near their prior top levels. Sometimes the indicators can remain at highs and form tops as stock gains continue but other periods have seen quick vertical pullbacks. The NYSE bullish % upturn last Tuesday confirmed the overall strength but was also another sign the rally could be near another top. Indicator downturns and drops below 70% should signal that.
John Gray, Investors Intelligence, www.investorsintelligence.com, 914-632-0422, March 10, 2014
