The stock market is bullish in the medium term

In February, the S&P gained only 1.1%, the DOW increased by 0.7% and the Nasdaq Composite lost 0.1%. This is sluggish movement but is not bearish. The down bars in the last seven trading days of February were largely reversed higher by the bars that followed. That’s bullish. The down bar on Friday, February 15 was reversed the following Monday, the down bar on Tuesday, February 26 was reversed by the bars by the following Wednesday and Thursday. It is easy to see how the market action of the last few weeks has occurred in the middle of the bullish trend channel that began last November.

Stock Market Sector Analysis reveals an overall defensive stance but with some bullish signals. Defensive consumer staples have much more relative strength than do cyclicals, technology or finance. The biggest trouble spots are the automobile and transportation sectors. The latter is especially troublesome because it is a mirror of the economy. This is not surprising given the very sluggish 0.1% growth in GDP during the fourth quarter. The energy sector sank 2.8% in relative strength. This suggests lower costs for gasoline and crude in the coming weeks as stocks tend to move before the futures markets. Consumer durables, big pharmaceutical and bio technology increased. The overall graph of cyclicals versus consumer staples shows a resurgence of the cyclicals over the last couple of weeks.

Here is the graph of the transportation sector relative strength chart:

transportation

Here is the graph of the energy sector relative strength chart:

energy

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