The stock market rally that began the day after Christmas is getting late in the game, but the game isn’t over yet. Now I’m actually starting to see some weaker individual stocks start to roll over this week. I even think TSLA is offering a good short entry point now for those interested in betting against it.
At the same time, we have gold pause and mining stocks too after their big run since October. I think this is the real place to make money this year as once gold goes through its $1330-$1350 resistance area we will start to see the mining stocks explode – and the small caps come alive to activate the market chasing masses.
I talked about this with Jordan Roy-Byrne of www.thedailygold.com and asked him what he thinks will be the catalyst event that will trigger the next big bull run. You can get this update here:
Now I still don’t think the stock market is likely to do much for the rest of this month. Really this week we got news of a budget deal and the announcement by Trump that he is likely to ignore the March 2 trade deadline and the market went up one day and just sat there.
The market seems to be drifting, which is ok as some individual stocks can still go up in such an environment while laggards start to fade.
Really the next real decline in the market is likely to begin AFTER the corporate bond market tops out. It’s really the rise in bond prices and subsequent drop in yields that has helped the stock market go up so far this year.
And last year the LQD corporate bond ETF topped out and started down about a month before the S&P 500 did.
Here is a chart of it now.
As you can see LQD started down for six weeks before the stock market tipped over at the very end of September. It even turned up in mid-December before the stock market did too so it has been leading the action.
The good news is that LQD isn’t falling yet.
The bad news is that it is extremely overbought, with an RSI that even got near 90 so it is likely making a top here.
This is a situation I will be watching very closely now going forward.
To listen to the discussion I had with Jordan go here