Every so often we have seen a clear divergence of opinion in wave count. Normally this blog posts the consensus view, but there are those times where there is a sharp difference. About six months ago Neely went bullish when Prechter was confident that the May top was it, in what he sees as a B wave off the 2002/3 bottom. Neely obviously called the market better back then. Over the last few weeks a similar divergence has emerged. Neely sees a strong uptick ahead - he has just gone off prediction for two weeks but his last recommendation was to go long. Prechter has instead been predicting that the big B wave top had happened again, and was recommending to go short or to cash. The STU has been watching a developing head-and-shoulders pattern, and as recently as yesterday saw immediate bearish potential. The market action today has blown that pattern, and in a special STU Hochberg sees more upside ahead - but only for a short time and modest upside. So another divergence.
What both have commented too little on is the rapid rotation out of commodities and cyclicals and back into tech - for the first time since late 98 in a major, broad fashion. (There was rotation back in in Mar 03, but in a selective, modest fashion, not across the board). Telecom stocks reversed their doldrums last March, and now tech is doing the same. This is what has been needed for the S&P to reach new highs. More on tech in a subsequent post.
With oil dropping towards (and likely below) $50, a slight strengthening in real estate (likely just a momentary counter-wave not an end to the downtick, but nonetheless a postponement of a large slowdown in consumer spending), and interest rates still low, we may be in for a delay in any recession, if not a soft landing. Put these together and we have the makings of a bull market extension.
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