Market Wrap – week ending 2/14/2014

Another astonishing week in the market.  Looking at the charts over the past month we have a sharp ‘V’ shape showing a substantial sell off of roughly 7% that only took a few days to accomplish, and then an equally sharp rise that brings us back close to the highs of late last year.  Although the S&P500 and Dow are still down for the year (and the Nasdaq is barely above 0), they all had an amazing week with approximately 2% rises.   

It certainly seems like the market wants to keep moving higher.  Most indicators are bullish.  Leading stocks are acting well, although they haven’t had substantial moves since the first of the year, we don’t see any sharp sell offs either … they are holding strong.  Bullish sentiment has come down to reasonable levels where as late last year this was a big concern with the frothy mindset.  Advance / Decliners are looking strong as well.

This week we had a myriad of negative economic reports come out, all of which were ignored by the market entirely.  This in itself is usually a strongly bullish gauge.  A market that rises with bad news is a healthy one, and one that drops with good news … obviously the opposite.

Lastly, the past two days we have strong positive reversals where the market spent the first hour dropping heavily and the rest of the day is spent reversing the decline and closing at a high for the day.  A market that can fall in the morning and close the day reversing any weakness is usually a healthy sign.

Our medium term and longer term strategies both entered the market this week, while “the One” is still being cautious due to the incredible volatile moves.  A market that drops and rises 6-7% as quickly as we have seen these past few weeks usually ends up with more downside to come.  Not enough time went by to create real fear and therefore we can experience another decline quickly.  If things stay sideways or increase, we will most likely enter in the early part of next week, we just need to give it a few more days to confirm that we are indeed not experiencing what is called a “fake-out”.  Remember “The One’s” primary objective is capital preservation, so we do not want to enter when the odds are against us.

Hope you have a wonderful and safe Valentine’s Day, and weekend.

Respectfully,