May Gleanings

A Monthly Chart Presentation and Discussion Pulling Together the Disciplines of Economics, Fundamentals, Technical Analysis, and Quantitative Analysis Published by Raymond James & Associates

We have always liked the movie “City Slickers” and particularly one scene. It’s the scene where Curly (Jack Palance) turns to Mitch Robbins (Billy Crystal) and says, “Do you know the secret of life?” The punchline is, “It’s just one thing” (one thing). For investors, we agree, all you need to know is just one thing. That thing was pointed out vividly in a book written in the 1920s about a stock operator named Mr. Partridge, often referred to as “Old Turkey” because he was such a shrewd investor. Consequently, many Wall Street wags would ask him, “What do you think I should do in the stock market?” Old Turkey would cock his head to one side, contemplate the question, and with a fatherly smile would say, “You know it’s a bull market.” It was as if he were giving you a priceless talisman wrapped up in a million-dollar insurance policy. And currently, the one thing you need to know is that – it is a secular bull market!

Our friends at the invaluable Lowry Research organization recently wrote about this by noting:

“From time to time, our commentaries have used a magician as a metaphor for the stock market. That is, one part of the market will serve to distract the audience of investors while the other part does the ‘magic.’ In today’s market, the major price indexes, principally the DJIA and S&P 500, are serving as the distraction, while the more significant action is taking place in the broader market.

“For example, while most market narratives have been focused on the volatile trading and limited gains in the major price indexes, small cap stocks have been quietly going their own way. In fact, over the past week, both the small cap Russell 2000 Index and S&P 600 Small Cap Index have recorded not only new bull market highs, but also new all-time highs. And, these highs have occurred in broad-based rallies, as both our Operating Companies Only (OCO) and S&P Small Cap Advance-Decline Lines have also reached new bull market and new all-time highs. Since small caps have, historically, been among the first stocks to show developing weakness as a bull market enters its final stages, these new highs in both the small cap price indexes and AdvanceDecline Lines suggest an ongoing and healthy primary uptrend showing few signs of age.”

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