MARKETS TAKE A BREATH

The uptrend in the markets finally took a break last week.  After a series of new highs it looks like a pause may be in order.  As previously discussed, markets appear to be technically overbought at this time.  The question is, are we consolidating or correcting?
 
With an interest rate hike this month all but assured by the Fed last week, markets seem to be ready to re-tune expectations.  However, the technical conditions themselves are not yet suggesting a change in course.  It appears a pull-back may still be limited at this time.
 
Current resistance for the S&P 500 is at 2400 and the 50-day moving average is right at 2300.  Much of a move above 2400 would be very positive while a move beneath 2300 would be negative. So, while a pull-back would be completely “normal” given the conditions the market is showing, there are several areas where buyers could stop a free-fall.
 
Perhaps the bigger question is how the news cycle will play out.  Pre-election, the talk was about the Fed.  Post-election, the hype has been about Trump’s economic plans.  At some point, expectations will need to become reality.  How long a grace period Trump gets is unclear.  Realistically economic plans take time.  In today’s age who said anything about being realistic?
 
For the past several years the end of the first quarter has been met with some level of pull-back.  It’s possible this pattern will reemerge given the significant moves the market has made since last November.
 
There continues to be little to suggest the markets are in for a major bear-market-style correction at this point.  That’s not to say it is not possible.  It just doesn’t seem to be on the radar yet.  We’ll just have to keep an eye on the stability of the European Union and our own domestic political scandals to see if any new information emerges.  

Stay tuned...