2/25/2015: Dow 18224.57 | S&P 2113.86 | NASDAQ 4967.14 | Russell 2K 1235.10 | NYSE 11117.93 | Value Line Arith 4844.90
Psychological: Bullish. January’s losses quickly tempered bullish sentiment that was at or near the highest levels of last year at the end of December. This sentiment reversal put enough cash on the sidelines to fuel February’s rally, but the number of bulls has quickly recovered with the market. There are even more bulls now than there were at the end of 2014, but not a great deal more. Current bullish sentiment readings suggest a dwindling amount of cash (that wants to be invested in stocks) on the sidelines. However, high bullish sentiment has only slowed the rally in recent years, it has not killed it.
Fundamental: Solid. 257,000 and 5.7% were the highlights of the January’s employment report. As long as employment data holds up, consumers will continue to spend and the U.S. economy should remain on sound footing. All is not perfect though. Large multi-national corporations are facing a stronger dollar and tepid demand in many overseas markets while low oil prices are weighing on the energy sector, here and abroad.
Technical: Broken out. It was a tough December and January, but DJIA, S&P 500, NASDAQ and Russell 2000 have broken out to new highs. NASDAQ is less than 100 points from eclipsing its old all-time closing high of 5048.62 set on March 10, 2000. Indices began their vault higher at the start of February and all four are currently well above their respective 50- and 200-day moving averages. Momentum has begun to wane this week, but if the indices can hold breakout levels around DJIA 18000, S&P 500 2090, NASDAQ 4800 and Russell 2000 1215 during this pause, additional new highs are expected.
Monetary: 0-0.25%. Measured, balanced, data-driven and patient are just a few of the dovish words the Fed and its members have been using lately to describe its plan for eventually normalizing monetary policy. This has all added up to a consensus that the Fed’s first rate hike since June of 2006 will not happen until sometime in the second half of 2015, at the earliest, and possible not until 2016. Long live the stock market rally as yield-starved investors has few other choices till then.
Seasonal: Bullish. Normally a decent performing market month, March performs even better in pre-election years. In pre-election years March ranks: 4th best for DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 (January, April and December are better). Pre-election year March has been up 13 in a row for DJIA and 9 in a row for Russell 1000 & 2000. In fact, since inception in 1979, the Russell indices have a perfect, 9-for-9 winning record.