Wow! Quite a rally that has been going on……

I know that I’ve been very cautious about this market, though I’ve stated that it is best to follow the trend. The tend is your friend and don’t fight the Fed! I have suggested that you protect your investments for quite sometime and I still feel this way.

Historically, the months of November and December are strong, the Christmas rally is for real?

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This chart by David Stendahl shows you the strength of the markets during this time frame.

Everyone is kind of writing off the recent decline of 10% or so as being insignificant and perhaps they are right. In April of this year I gave a scenario  (bottom of the page) where the S & P 500 could reach 2160, so after a slight correction of this big move perhaps that number will be achieved.

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Can you trust the markets with the Fed out of the picture, at least as far as quantitative easing? It’s really hard to tell, but, as always I will put forth another cautious view on the markets.

There is a bit of a divergence going on that is reminiscent of the 2008 collapse in the markets. There is an index called the S & P  bullish percent index that bears watching.

Here is the top in 2008:

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and now:

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The S & P has rallied to new highs yet the bullish percent index is well below its previous high. That is a warning signal!

A look at the S & P 500 shows a market that is seeing profit taking. Perhaps, its just ephemeral and the market eill hit my price target of 2160 then again………

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A normal correction of the recent advance would be 33-50%. That would give the markets time to rest prior to making the push to 2160. It could also fail and give the same result as 2008:

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I think you can understand my concerns……….

 

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