We've had steady, rising trendline (green) for the S&P 500 since October. Moving averages (red and blue) are both positive.
There is a possibility of a slight pullback to the lower end of the trading range. Possibly 3230 (-3%) by February/March. Not a big deal.
Conclusion: The "trend is our friend" here. Don't fight it.
Recent gains are supported by healthy trading volume. We had a few low-volume days over the holiday season, but this is normal..
Conclusion: New money is still going into the market. It can continue until everyone is fully invested and we all have the most to lose.
Markets are officially in "overbought" range and have been since mid-December.
Conclusion: This is what a raging bull market looks like. Enjoy it while it lasts...
In all seriousness, this is a fairly supportive market for investments. The last two decades have generated below-historically average returns for most investors. So, it's nice to have a break from that and feel like it is the 1980's/1990's again. Depending on what valuation metrics are used, the market can be shown to be "over" or "under" priced.
This is a very uncertain political landscape, so everything can change in less time than it takes to post a coherent blurb on Twitter.
My sense is that interest rates, tax cuts, and temporary relief from trade worries can support market growth, which could continue for the first half of this year. In the second half of the year, we may see some softness without additional economic stimulus. 2021 could be a tougher environment.
At the moment, I'm most interested in foreign emerging markets technology stocks.
Sounds a little crazy, I know.
Jim Lee, CFA, CMT, CFP®