Given the recent market action, I am now starting to pull in my horns a bit, as this rally looks to be getting a little tired and showing signs of technical deterioration.
We may yet see a new high in this move off of the lows (though that is not guaranteed). However, I see a significant increase in the odds for a fairly substantial correction — in the 5 – 15% range — over the next 60 days.
5 factors are making me more cautious:
1) Over the past 4 days, we have had 3 failed rallies;
2) The number of New Highs on the major indices is contracting;
3) Stocks seem to be reacting far less enthusiastically to earnings beats then they had been;
4) The Transports have been acting squirrelly lately;
5) The S&P is forming an Ascending Wedge (more on this later today).
One bonus factor: I am about to do some extensive traveling (Dallas, Austin, Detroit, Santa Rosa, San Francisco, Berlin (GER), Chicago, Miami, Aruba) over the next 5 weeks. Mr. Market is notorious for waiting for me to be out of the office prior making his big move (Bastardo!)
Note: This is not a major call, it looks to me like more of a minor reversal. (Sometimes, those can evolve into something more serious). The reason I expect it to remain modest/contained is the ongoing stimulus to the markets of zero percent interest rates . . .