Nice rally. And we caught a sizable portion of it. In fact markets may just be back to repeating their familiar script. Off to new highs. After all they did so in 2014 after initial January weakness.
It has been a nice trade, but I scaled out. Why? Shrinkage. Not my own I’m happy to report, but the internals keep shrinking in this market and show a distinct difference to 2014:
1. Stocks above their 200MA are trending lower versus index price advances:
2. And likewise high/lows refuse to expand and are much lower than they were in February 2014:
Now that doesn’t mean this can’t change for the better, in fact we may indeed ramp right up to new highs, but more often than not shrinkage can have unforeseen consequences as perception is reality. Or is it?