A Look at the Technicals

This has been an ugly market. A couple of weeks ago, the U.S. stock market looked to be setting up for a nice recovery. Then, Russia invaded Ukraine and reality overwhelmed the positive technicals in financial assets. The Bull warned that macro events could overwhelm the internal positives, and they did.

Today, we look again at the internal action of the stock market. Amazingly, there have been positive divergences with money inflows stronger than the price action. Money flows have been vacillating between slightly positive and negative, certainly not the slide one might expect. With the recent slide, stocks have gotten oversold, so a rebound has been due. Hopefully it will be durable. At several points, money flows have been very strong.

The good news is that this shows that there is significant accumulation of equity assets. Everyone selling out of fear is being met with bargain hunters snapping up good values. The Bull expects many companies to start making bids for others; opportunities abound. It is a great time to acquire competitors or add new capabilities to existing ones. Some firms are also stepping up their stock buybacks while they are cheap. One can never be certain as to when a significant rebound starts, but the technical setup is favorable: strong accumulation, potential for increased mergers and acquisition activity, and still plenty money around. Stay steady, my friends.

The Lonely Bull