Trying to call cycles in a runaway bull market is difficult. I was thinking that we might get a pullback to start the year, however, the markets are bringing a lot of new investors along with it. You have demand exceeding supply and prices go higher. In my last post, I described what I thought the markets might look like in 2018; You can review that by clicking here.

After this mornings 200+ run-up, we appear to be seeing some profit-taking. We really do need a correction to relieve the market’s surge to the upside, the markets are overbought. If we were to continue on this track, the bubble that I have talked about might come sooner rather than later.

The chart below illustrates what I have been talking about. In order to have a stock market run that will last through the year, the trajectory needs to be much more gradual, and this should necessitate a meaningful correction. If we continue to see these blow off rallies, then I think the bull market will end much sooner.

The US Dollar is another story, and probably what is driving the stock market higher. A weaker dollar is good the US exports and can fuel the economy. It appears as though the dollar is entering a new bear market, the most recent rally was extremely weak and we have broken support.

On the surface, this means that other currencies get stronger against the dollar. As you can see the trend channel of the USD/Peso has been broken, with the Peso showing strength against the USD. If the Peso were to break below 18.50, then I think the chances of moving to the 17.50 range will increase.

I would advise that you watch your portfolios very carefully. If you need assistance and live in Mexico send me a message and we can schedule a free consultation. You can click here to reach me.

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