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Yesterday, we added to our 401(k) long equity exposure. We swept additional cash into TRBCX, a position we started on the heels of the recent break to fresh all time highs. We started new positions after the election and added to them as the indices rose.
Market Drivers
Post election, fund managers have been adding to their long exposure in US equities. As a result, TICK cumulative continues to rise, bottom panel. This one sentiment indicator aides in weighing out analysis.
As markets broke higher last week, selling hit the tape on Thursday. We looked to TICK cumulative to determine whether the pullback was month end selling and/or rotation in to strong sectors. This appears to be the case, as big tech companies continue to report earnings. Apple beat.
Note the base at current VBP levels. This is support. As long as price stays above this zone and the 9/20ema, we are bullish.
The administration’s tax policy will affect corporations.
As such, insider buying continues to trend higher. Corporate leaders are buying more of their own stock. The link is from an article Mikey shared this morning.
The Bond Stock Ratio – UST SPX
Below is a familiar chart of the ratio between bonds and stocks. In late 2012 this ratio turned lower, signaling the beginning of a 2 year cyclical bull market in the S&P500. The ratio is currently moving lower. While this does not mean we throw caution to the wind, it does warrant closer inspection. We need to see additional signs that the markets are aligned, to stay the course, while Washington changes to a pro-growth, minimal regulation, lower Corporate tax rate environment.
Berkshire Hathaway bought $12 billion worth of US equities since the election.
“We’ve, net, bought $12 billion of common stocks since the election,” Buffett said. Apparently, Warren’s team is reading the same syllabus.
Our outlook is not without its caveats
While we are bullish long-term, there will be periods of back and fill along the way to higher prices. If we consider the bullish possibilities and reference previous secular bull markets of the past century, we can gauge where we might be headed and how close we are to the top or bottom in the cycle. We are starting the 8th year in the current secular bull. The last secular bull lasted 18 years (1982 through 2000). The early 1980’s also held similar “policy” views, with lower corporate/personal taxes and less regulation. – chart courtesy Dshort
We are bullish when price action is above short term moving averages on multiple time frames. Daily, weekly and monthly charts reflect our sentiment and market outlook, therefore we are longer term bullish at this time.
Happy Trading – Vinny
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