The Closing Look
Stocks were relatively quiet on Monday as the market paused to digest the very strong rally we have seen since the Feb 11th low. Apple unveiled a few new (lower priced) products which are aimed at capturing a broader audience. In other news, Starwood Hotels and Resorts ($HOT) accepted a higher offer from Marriott International Inc ($MAR). Economic data was less than stellar, existing home sales fell -7.1% to 5.08M, missing estimates for 5.3M. Overnight, the governor of the People’s Bank of China was cautious about corporate debt. China’s central bank warned that the ratio of corporate debt vs gross domestic product had become too high which may become a big problem in the near future.
Gary’s Thoughts:
It may seem like a quiet day in the market but for us, Mondays action is another constructive day. When the market is way overbought and market needs to pull back and when a market doesn’t pull back, it simply remains bullish.
On November 8, 2015, after a 13.3% rally for the S&P 500, we thought the market was getting in trouble again. We were right as it started another topping out process which led to another big drop. On a daily basis we look to see whether that process is starting again. As of this second, we are seeing nothing that resembles what we saw and what we started to see on November 8.
In fact, we are tending to see daily improvement as more and more areas and more and more names turn the corner. Even the horrid biotech got a bid today as a couple names turned the corner!It was this turning of the corner that alerted us to tell you the market was ready to rally.
We do not care as to why. We only care about what is. But if you need to know why, look no further than the chart we posted at garyk.com as central banks again have gone into hyper drive. EASIER MONEY is working. But we do believe there will be diminishing returns so pay attention.