After the stock market has had a sizable run, there is a natural tendency to wonder, "what can go wrong?" We all know that the good times can't last forever, so we start to focus more on the things that might cause the market to reverse.
Great trend followers look at the market differently. They focus on what can go right, and what will keep this market running.
Of all the lessons I've learned from Jim Cramer over the years, this is my favorite. Jim has always had the ability to stick with a strong market when other pundits are predicting doom and disaster. Maybe he has an inclination to be optimistic, but it has served him well to focus more on what can go right rather than what can go wrong.
So what can go right in the market?1. Earnings season picks up this week, after a good report from JPMorgan Chase ( JPM) on Friday. Goldman Sachs ( GS) reports this morning, but the big report will be from Netflix ( NFLX) on Tuesday after the market close. IBM ( IBM) also reports, then and there are several financials that will report -- but the big guns won't be until next week.
The reaction to earnings will tell us quite a bit about this market. The bearish narrative is that expectations are high and growth will be quite a bit lower, but we'll see what the reaction will be as more reports roll in.
2. Another bearish narrative recently is that economic growth is slowing. There has been some weak data on Europe, but China has put up some good numbers recently -- and the payroll numbers in the U.S. are stellar. We have an idyllic situation right now of low inflation, ok growth and friendly central banks. It is perfect monetary conditions, although there are plenty of grizzlies growling about how central bankers can't drive this market higher forever.
3. There have not been any big moves on trade headlines in the last couple weeks, as that catalyst has grown old and stale, but there is still the potential for positive development to hit. Expectations are that there won't be any news for a while but the indications are that there has been some real progress and the parties are making headway.
4. Technically, the indices have had a substantial run off the December 24 lows, and it is easy to say that they are overbought and need to correct. But the technical pattern continues to be a great example of a trending market. While it has been lopsided action to the upside lately, the trend is very strong and there are no sighs of distribution or other problems.
Of course, there are some problems the in market. There always are. The bears will tell us that there is too much complacency and a failure to appreciate all the terrible things that lurk.
Some of the price action in individual stocks has been rather mixed. We've had some odd leadership lately, like Disney (DIS) and Apple (AAPL) , offset a tremendous amount of weakness with its recent runs. The big IPOs are eating up a lot of capital and Lyft (LYFT) has definitely been a disappointment.
There are plenty of negatives, and if you focus on them the case for market downside is easy to make. However, if you focus on what can go right, it isn't so hard to appreciate that this market may just keep on running.
We have a positive open on the way and generally good action overseas.