MARKET REVIEW AND UPDATE
Over the last several weeks, we have repeatedly discussed the “money flow” sell signal that suggested “weakness” in prices. Such was a point we reiterated in last weekend’s newsletter:
“Currently, the money flows remain positive, but ‘sell signals’ are firmly intact. Such suggests downward pressure on prices currently. We do expect that market will likely muster a short-term oversold rally next week. However, the risk of a continued correction in March is likely if money flows deteriorate further.”
Well, the markets did indeed rally as Congress passed the mammoth $1.9 Trillion “pork fest” stimulus package. While this bill is nowhere close to being “reformative,” as touted by the Democrats, it does inject a lot of capital into the economic system. Given that the Federal Reserve will have to monetize the bill’s entirety, it is not surprising the markets get a lift.
In our recent 3-Minutes On Markets and Money video, we discussed the triggering of the short-term “buy signal.”
The good news is the rally took the S&P back to all-time highs reducing concerns about a more significant decline in the near term. However, with money flows still trending negatively, we may see some recent advance consolidation next week. Such is consistent with the previous breakouts we have seen over the last several months where money flows were trending negatively.
SPY Chart