Good Monday morning and welcome back to what appears to be a celebration of tax reform on Wall Street. But before we get ahead of ourselves in terms of how far the bulls are going to run today, let’s start the week with a look at my key market models/indicators and see where we stand. To review, the primary goal of this exercise is to try and remove any subjective notions about what “should” be happening in the market in an attempt to stay in line with what “is” happening in the markets. So, let’s get started.

EXECUTIVE SUMMARY: MY TAKE…

The most recent burst to the upside, which began on November 21, has definitely been impressive. However, the key question at this point is if the move represents the onset of a fresh leg higher in the cyclical bull market that began in February 2016 – or – a “blow off” phase, which is where price peaks tend to occur. Personally, I’d feel better about the current move if a new “breadth thrust” signal were to occur. But since the move is still quite new, we will have to wait a week or so to see if the bulls can succeed on this score. It is also worth noting that the rate of ascent is quite steep here, which brings the sustainability of the move into question. In addition, the surge in prices is causing valuation indicators to move the wrong way – I.E. the “P” in the p/e ratio is moving up faster than the “e” (earnings). However, the absolute bottom line is this is a bull market until proven otherwise. And while we can argue that this bull is showing signs of aging, the bulls continue to deserve the benefit of the doubt.

THE STATE OF THE TREND

We start our review each week with a look at the “state of the trend.” These indicators are designed to give us a feel for the overall health of the current short- and intermediate-term trend models.

Executive Summary: