Trouble may be on the way. The issue the Bull and his partners see is that upside performance of the major indices is being driven by just a few stocks. A few making higher and higher highs while the rest are languishing. The old cliché description is that the generals are leading but the troops are not following, not a good situation. Money flows have also turned negative.
These concerns can be aborted if during this earnings reporting season the market advance broadens out. This could happen if the earnings reports, in general, show very good profitability and revenue growth and more investors take heart and confidence that this will be sustained. Improved growth among our major trading partners could also generate improved sentiment.
Obviously, the Bull cannot know how things will work out. However, he and his partners are watching intently. In the meantime, almost all accounts have been rebalanced reducing risk from the outperformers and highly valued (expensive) stocks. Allocations have been brought back into line with each account’s guidelines. The best scenario will be for increased positive participation by more and more stocks, we shall see. We are prepared to adjust to best manage through this period; stay steady, my friends.
El Solo Toro