Last Friday's stellar jobs report fired up renewed enthusiasm for the stock market and send major indexes soaring. Yet, some market strategists remain concerned that the Trump camp's priority announcements on trade and policies could screw up both the economy and financial markets.
Wall Street had run up sharply following Trump's election win on expectations that tax-cuts, deregulation and fiscal stimulus would accelerate economic growth
Apparently, the market had priced in only the potentially bullish impact of such of such policies. But now investors are seeing some bears licking their chops in anticipation that the rise in populist and protectionist sentiment will put a crimp in this rally and make short positions in this game attractive again.
But for now it appears that Wall Street remains in a consolidation mode, while getting ready for a major pullback.
Check this DOW candlestick chart [DJA] and keep in mind that red candles project a bearish trend and white candles favor the bulls with a wide range of variations in between. The size of these candles suggests the degree to which the market could move up, down or sideways.
After consolidating during December and January, the market appears to be stuck in a tight trading range. Check the MACD momentum bars which are similar on both charts below the demarcation lines.
This means that there is no momentum to speak of up or down, and that makes the market vulnerable to a steep nosedive.
Check the mid-caps [IWS] and note that momentum has been a problem with this market since the middle of December. By the looks of things, this is only getting worse, not better.
Although the Moving-Average configuration is still bullish with the red line above the green line, it is beginning to look "iffy." The gap between these two lines is shrinking and should the red line slip below the green, watch out down below.
While consolidating since last December the small-caps [IWO] maintained a bullish mode with the red MA line above the green. But again, the gap between these two lines is getting to be quite narrow, and should the red line slip below the green, etc. etc. etc.
Also, that the MACD momentum bars appear to be stuck on the demarcation line isn't helping this rally either.
The MA lines configuration for NASDAQ [NDX] remains quite bullish with the red line above the green. But the RSI strength indicator is getting to be sharply overbought along the top of its trading channel. This means that the NDX is overbought, top-heavy and ready for a pullback.
The MACD momentum bars keep sticking along the demarcation line, which means that just like the other indexes there is no momentum in this game to either side.
The financial sector appears to be in trouble. Although this index keeps consolidating along the ceiling, its MA lines configuration is getting to be iffy as the gap keeps narrowing between the red line above the green.
Also [what else is new] the MACD momentum bars appear to be unable to make it above the demarcation line and that surely doesn't help the market any.
The yellow metal [GOLD] surely is struggling to get a move to the upside. Its MA lines configuration is quite bullish with this widening gap between the red line above the green. Also, the RSI strength indicator appears to be solid in its bullish territory.
But again, it appears that upside momentum is lagging with the bars stuck on the demarcation line, and without momentum, up or down, nothing has any appreciable staying power.
The gold miners [GDX] are sure in a bullish mood and that got this index soaring. In fact, for gold this may be too much of a good thing because the widening gap between the red MA line above the green indicates that gold has become overbought and that may trigger a pullback in anything gold related.
But again, the MACD momentum bars are stuck on the demarcation line which means that just like most sectors of this market the GDX is neutral, and could flip either side.
Even though the semiconductor [XSD] sector of the market has soared too far too fast and that has made it top-heavy and may need some time to consolidate.
This may also give the MACD momentum bars a chance to strengthen. Still, the XSD remains certainly bullish.
Semis and technology [IGM] appear to be joint at the hip, where one goes so goes the other. This tech sector is certainly bullish with the red MA line above the green and the RSI strength indicator in its bullish territory.
But again it are the momentum bars that just don't have what it takes to stay above the demarcation line and thereby get a sustainable rally going. This is a sign that market participants simply are not participating.
Healthcare [XLV] is certainly maintaining a bullish stance. The MA lines configuration is bullish with the red line above the green, the RSI strength indicator is solid in its bullish territory and even the MACD momentum bars show some strength inside the bullish territory.
After consolidating for most of this year oil [WTIC] is taking on a bullish hue. The red MA line remains above the green and the RSI strength indicator keeps consolidating inside its bullish territory. But again, it are the MACD momentum bars that seem to be unable to stay above the demarcation line and thereby give support to a rally.
So all in all, the internals of this market look pretty good but the upside momentum will have come alive for this rally to continue.
Check my Home-Page for more ETF and market info; and