The S&P 500 index has finished the 2nd daily cycle on 02/27/2019. Now it is marching into the 3rd day in the 3rd daily cycle, which means it is entering the beta cycle phase in the weekly cycle. The market looked straight up in the untrained eyes because of the low volatility, but the cycles are functioning as they have always been.
The weekly beta cycle will take the market to new heights. If the eventual high is 5% over the 200-day moving average which is currently at 2750, the eventual high would be 2887. Once this weekly beta cycle high is achieved, the market will have a fast and furious selloff to go below the 200-day moving average. With the pending resolution of the trade war, the market will rally the last mile of this weekly cycle in the entire month of March. The fast and brief correction will come after all the good macro news are prevailed sometime in April-May time frame.
We have to be patient while the market is grinding slowly to achieve its target. There is no sense to short the market because it has gone up too much. This is the time to hunt for stocks that beat earnings and offered good guidance.
The groups that have outperformed the SPY are:
XLI–industrials, the biggest winner is BA
IWM–small caps, small caps are more interest rates sensitive, low interest rates help the small caps more than the mega caps
XLE–very oversold sector, cyclical rebound
The sectors that have outperformed the SPY are:
Broker and dealers
You can see the rally has been very broad, these are the classic signs of the begin of a brand new bull market. The market rally is no longer limited to the FANG group. As a matter of fact, the FANGs have been under performing with the exception of Netflix.
Buy and hold strategy will work from here until the election in 2020!