Bide Your Time, for the Bigger Game Awaits

Despite some more dealmaking this morning, namely SCHW buying out AMTD (which, by the way, the market is wholeheartedly celebrating since the acquiring firm, SCHW, is higher by 8% in addition to AMTD up around 20%), the broad market remains in near-term pullback mode after a multi-week advance on the major indices. 

Naturally, bears will argue this dip is merely the start of the type of correction we saw to conclude 2018, or worse, while bulls are looking for this dip to be short-lived as we are in the midst of a fresh broad market breakout across the board. 

In discerning which side has the upper hand here, we continue to defer to the overall technical predicament of the senior indices, all of which are operating above rising and smartly-aligned (20-day, 50-day, 100-day, 150-day, and 200-day) daily chart simple moving averages. Until that changes, the bear case from a technical perspective is conjecture. Moreover, we know sector rotation has been a key development for bulls of late. Money flowing from semis to software, and vice versa, has helped to keep bears at a distance just when it looked like a given hot sector was cooling down. 

But turning back to the major averages, aside from the IWM (small caps) needing to clear $160, which is something we have written about extensively of late and discussed with Members, the senior indices likely should find initial support at their respective 20-day moving averages (orange line on my charts) if the bull thesis is to hold water. 

The reason for that thesis is because in the relatively early stages of a new uptrend, if that is what this, in fact, is, we almost always see shallow and short-lived dips which are rather quickly gobbled up due to newfound strong demand for equities. Hence, a dip to the 20-day on the senior indices would qualify as a shallow dip. Anything more than that is not necessarily bearish, but certainly should slow down even the most steadfast bulls in the near-term.