The stock market’s breadth has weakened a little, which is no surprise given the stock market’s recent pullback. The % of NYSE Composite members at a 52 week high dipped below 1.5% for the first time in over 2 months:
The recent historical cases of a pullback after strong breadth (Feb 2018, October 2018, Feb 2020) saw stocks fall further in the weeks ahead:
This is a minor bearish concern.
Small caps outperformance
Small caps outperformed large caps for 5 months in a row:
Historically, this often led to more small caps outperformance over the next 6 months:
The ISM manufacturing business prices index reached a multi-year high, indicating inflationary pressures and continued supplier pricing power:
Historically, such inflationary pressures were bullish for gold over the next 9 months:
Monday’s silver surge pushed the gold/silver ratio to its lowest level in over half a decade. Precious metals bull markets are signified by a falling gold/silver ratio since the more volatile metal (silver) outpaces the less volatile metal (gold):
Historically, this was bullish for gold over the next 9-12 months:
- Short term trend followers should continue to ride the bull trend because no one knows exactly when it will end.
- Medium term traders should go neither long nor short.
- Long term investors should be highly defensive right now. This speculative bull market may last another 6 months or even 9 months, but in 2 years time, long term investors will be glad they did not buy today.