Friday, December 13, 2013

Indicators still neutral, rally continues

Short-term and seasonal factors are not favorable for the stock market, but long-term indicators still allow for a continuation of the rally that started in the spring of 2009.

The market bot "internal price forces" have fallen to 4.1 out of 10.  This is still comfortably neutral, and the market has rallied through lower readings in 2010 and 2011, so there's no cause for alarm at this point.

Sentiment indicators are at their most optimistic levels in more than two years, which is bearish in the short term.  A decent correction of 5% or more is likely, presumably followed by a resumption of the long-term rally.

The curious four-year stock market cycle is nearing its expected peak in May 2014, at which point returns historically turn negative leading up to the mid-term election in November.

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