Markets Have Continued to Rise But Caution Is Advised


As we approach mid-year, the markets continue to rise, and we are getting closer to the all-time highs we saw following President Trump's victory.  It appears that the doomsters were overly pessimistic about the market, but as you know, the market is a fickle beast.  One positive sign that we may be out of the woods is that Warren Buffett has started buying stocks again after several quarters of net selling. Berkshire Hathaway purchased shares of eight companies, including:

  • Sirius XM Holdings (SIRI) – Satellite radio provider with a legal monopoly in its industry.
  • Occidental Petroleum (OXY) – Oil and gas giant, signaling Buffett’s bullish stance on energy.
  • Chevron (CVX) – Another major energy company, reinforcing his long-term oil investment strategy.
  • Pool Corp. (POOL) – Leading supplier of swimming pool equipment and maintenance products.
  • Liberty SiriusXM Group (LSXMA) – A holding company with a large stake in Sirius XM.
  • Kraft Heinz (KHC) – Buffett has reinvested in this food giant after previously reducing his stake.
  • DaVita Inc. (DVA) – A healthcare company specializing in kidney dialysis services.
  • Visa (V) – A financial services powerhouse, showing Buffett’s confidence in consumer spending.

    • Buffett’s buying activity suggests he sees value opportunities despite market uncertainty. His Buffett Indicator also signals that these U.S. stocks may be undervalued.

    I find it interesting that so many big banks and financial institutions predict the market will end the year below current levels.  For example, JPMorgan cut its target from 6,500 to 5,200, a 20% reduction, citing concerns over tariffs and inflation. Evercore ISI lowered its forecast from 6,800 to 5,800, reflecting a 14.7% drop in expectations. Bank of America previously set its target at 6,666, but revised it down to 5,600, a 16% cut. Morgan Stanley initially projected 5,500, but now sees a potential decline to 4,700, 7.4% below current levels.

    For now, the market should continue moving higher, but caution is advised. My assessment is based on the unique set of indicators and charts shown below.  

    Since my last post, some indicators have reversed or changed to neutral.  Specifically, the 1-hr EMA and TSI for US 500 are now pointing down.  We are therefore at risk for a short-term drop, especially since the two Slow Stochastic indicators are in overbought territory.  In addition, the 1-hr Mean Reversion indicator for US 500 has flipped down, and the 4-hr Mean Reversion indicator is now neutral.  This suggests the market could move sideways or drift lower.  

    I also note that the FEAR/GREED INDEX is on the GREED side of the spectrum.  Since this is a contrarian indicator, we may see some selling in the near future.  

    The 4-hr Engulfing Candle chart for US 500 is now signalling SELL, while the Engulfing Candle for SPY is still signalling BUY.  The opposing signals suggest we may see some sideways action.  



    If you've been following my posts, you've had some good opportunities to benefit from Call Options in the last few days/weeks.  I decided to buy just a couple of May 30 SPY 590 Call Options yesterday, but I will probably sell them first thing tomorrow in light of the changes we are seeing in the charts.  

    CONCLUSION:  Although I believe the markets will continue to rise, we may see some sideways movement or a short-term reversal on Thursday and/or Friday.  Caution is advised.  


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