While we think this market more resembles a 2013-type of rally environment rather than the chop of 2014-2016, we want to be on the lookout for potential cracks in the armor. We offered up some stats in our last post that confirmed our bullish bias however we also know markets don't go straight up and even in strong years like 2013 there were plenty of small pullbacks and consolidations.
Below are some of the measures we're watching that may be a tell for a pause in the uptrend.
- High Beta vs Low volatility ratio has peaked
- The current weakness in oil
- The pullback in high yield and junk bonds
- Small cap weakness
- Narrowing leadership
- Length of current move without correction
Every time the high beta vs. low volatility ratio peaked and then broke its uptrend the general market has also peaked and pulled back.
Oil and Junk Bonds had a rough time last week while small caps have underperformed by a wide margin over the last month.