Tight sideways motion for the last four days

The pattern over the last four days suggests that the stock market cannot move higher. On Tuesday, Wednesday and Thursday the market tried to move higher but waves of selling pushed the price down. On Friday, the price started higher at the open and then fell through the day for a loss. If the market was about to head higher, we would not be seeing this hesitation. Instead it would be big steps up in price. As I have relayed in previous weeks, the valuation of the stock market is extremely expensive at roughly twenty-five times average earnings (i.e., the historic average is about fourteen times earnings).

My relative-strength sector table shows the cyclicals, the weakest this week, losing a huge 1.26% since the beginning of December. Seven of the eleven sectors in the Cyclical Group were losers; aerospace, basic materials and the machine sectors were all very large losers. Historically, the stock market moves up when both technology and the cyclical groups are strong.

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