What Conditions Exist That Will Take This Market Higher In the Near Future?

 | May 15, 2018 | 1:58 PM EDT
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I frequently preach that it is better to use the price action as a way to navigate the market rather than to try to predict what will happen based on news and fundamentals. As I wrote this past weekend: "Predicting the Future is an Overrated Trading Strategy".

However, when considering the current price action we can't completely ignore the future. We have to consider what potential catalysts might exist. Currently the charts of the major indices look okay but I am asking myself what conditions exist that will take this market higher in the near future.

We know from the reaction to first quarter earnings reports that valuations don't seem to matter much. Despite good reports and strong growth, stocks did not react favorably to the news.

Ironically negative news like trade wars often ends up being a positive catalyst. President Trump has a pattern of making very aggressive decisions and then backing off which causes a positive market reaction. We saw this with Korea, trade wars, drug policies and a variety of political issues.

One major concern is that since the top in late January the character of the market isn't as buoyant. We have had three good rallies and some V-ish action but it didn't persist like it did in the past. The pullbacks have bene abrupt and have had better momentum.

My biggest concern is interest rates. The chart of the 20+ Year Treasury Bond Fund (TLT) looks extremely poor and suggests that rates are going higher.

The bears have long believed that higher rates would eventually kill this market. They have been wrong for years but the potential that they may now be a negative catalyst is growing.

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