Is this the Top?

My wife and I hit a milestone last night, celebrating our 15th Wedding Anniversary. It is has been a great journey to reach this point. There have been a lot of ups and downs. Several homes and moves with lots of packing, too many times NOT for a fun get away. We are changing that today as we take a long weekend to pull back and to celebrate this milestone in our lives. Our kids may look at this as a major achievement, and it is, but it is in many ways just another step in the longer path higher.

The stock market is hitting milestones. It seems more like every month though, not just after 15 years. And it too is pulling back into the weekend. This is causing concern for many, I am sure. Despite understanding that stocks go both up and down, no one invested in the markets is ever happy when prices are falling. So as the S&P 500 pulls back moods are getting worse.

But the pullback, from a technical perspective, is not really a bad thing……. yet. Coming into Friday morning The S&P 500 ETF is just starting to close in on its 20 day SMA. It had been extended with the quick move higher in January. This pullback has allowed momentum indicators to reset. The RSI had been deeply overbought and is now back in the strong bullish range. The MACD has come off of its high as well.

Of course every pullback from a top looks benign as it begins, so how is this one different? It may not be. It may continue to move lower. Maybe all the way back to the 50 day SMA at 270. That would mean the S&P 500 ETF retraced the entire month of January gains. The elusive 5% correction would be there. And it still would not have touched the better than 20% gain from 2017.

No one can tell for sure where a pullback will end. What we do know is that the fundamentals in the market place are very good. Companies are beating earnings estimates and then raising their guidance. Interest rates, although rising, are still very low. Inflation is still more of a worry than a real thing. All of this plays a role in how investors perceive the economy, and then what they do with their investments. For now there is a measured pullback underway, with what seems like late day institutional buying. That could change at any point. If it does this weekend, I will be at the beach, give me a call.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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