Mid-Month Update: What Goes Up Must Come Down, Eventually
By: Jeffrey Hirsch
November 09, 2017
Today’s market selloff had the makings of the biggest decline since August, but it did not amount to much in the end. Eventually this spinning wheel will come down, but as we have been saying, it will likely take a major shock to the system, whether internally or externally, to knock this market off its high horse.
Disappointment from the GOP’s watered-down tax reform bill sent stocks reeling early in the day, but once traders realized that the tax plan amounted to next to nothing, cooler heads prevailed and folks realized that not much of anything is likely to get passed by the current Congress, which means nothing changes and Wall Street can stick to its existing playbook, pushing stocks higher until something breaks – maybe it’ll be speculation in Bitcoin Futures that will finally break this rally’s back.
So for now, we are going to drop all our troubles by the Hudson riverside, ride the seasonal patterns and let the rallying market ride once we get our Best Six Months Seasonal MACD Buy Signal. For now the Best Six Months Seasonal MACD Buy Signal is still on hold and on days like today that has provided some solace.
Our current strategy of holding our big winners though the Worst Six Months, while maintaining a sizable cash position as well as some defensive holdings, has proved prudent. A few of our new stock and ETF picks have been added to the portfolio, but many remain above their respective buy limits or await our Seasonal MACD Buy Trigger. 
Bullish market sentiment and the spread between bulls and bears remains at early 1987 levels, which suggests this market still has further to run, though it does create an ominous portent for next year in conjunction with treacherous midterm election year patterns, rising valuations, the prospects for tighter monetary policy and mounting geopolitical concerns as President Trump gallivants through the Fareast while North Korea, Russia, Iran and ISIS et al appear to lie dormant for the time being.
Fundamental readings out of corporate America and the U.S. economy continue improving at a modest, yet precarious pace that could easily be rocked by a systemic, economic or geopolitical setback. Technical indications are weakening, but appear to finally be setting up for our Best Six Months Seasonal MACD Buy signal. Patience is in order. 
So with the Best Three Consecutive Months upon us on the heels of a great Worst Six Months, history is on our side. Look for stocks to drift higher with minor setbacks in early December and mid-January until the midterm election campaigning season turns ugly in the spring of next year. As the new Fed Chair takes over the reins early in 2018, political, fundamental and technical factors will likely weigh heavier on the markets. But for now, let the spinning wheel spin.