Newsletter of Danny Merkel - Issue #116

Market Review:

Most stocks rose this week, and this strength was enough to nudge the long-term trend for the S&P 500 higher:

Although this shift in trend is a good start, it’s important to keep in mind that the upward momentum is incredibly weak. The histogram in the chart above is still hugging the neutral line, which shows that bulls are only slightly stronger than the bears.

Based on this change of trend, one could make the argument that the bear market is over. While that may be true, the problem, in my opinion, is that the bear market was too short and too shallow to reset sentiment and sow the seeds for a powerful new bull-market.

Secondly, SPY traded through the $410 handle on Friday. That’s about the same level as May 2021 (black circles).

In a healthy bull-market, one would expect the market to be higher today than two years ago. Bull markets involve stocks going up year by year, and that’s not actually happening today.

This weak bull-market price action isn’t an ideal envi…