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Up 4 days to start a year for only the 9th time since 1960

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The market rally continued and the week ended with a flurry as the Dow gained another 221-points on Friday. It's only the 9th time since 1960 that the indices started the year with 4 consecutive gains. That's usually a good sign for the market for the year, although 1987 was one of those years and of course we saw a major market crash that year, but surprising 1987 did end with a small gain despite that crash because the first half of the year was so strong.
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The small caps were actually down until that late rally into the close, but some kind of buying program kicked in and they may be what is keeping the momentum running.

As we've mentioned last week, we're in an historic streak for the longest period in which the S&P 500 has not experienced a 5% pullback. Is there a reason for stocks to pullback now? Maybe not, but I can see some folks who know that stocks don't go straight up forever, taking some profits soon if they've been smart enough, or lucky enough, to hold this long. There were 3 other time periods that matched this 5% streak we’re seeing now, and after each of them, the S&P 500 declined more than 7% over a period of 30-40 days.

The jobs report came in lighter than expected with December adding 148,000 jobs, which was below the 180,000 or so that was expected. Overall however, it was a decent report for the economy, but not too strong, with wages continuing to rise, the unemployment rate staying just above 4% and the combination may be enough to keep the Fed from getting too aggressive with rates. If we start seeing the unemployment rate dip under 4% and jobs and wages moving up quicker, interest rates will likely be accelerated so this report one the market obviously liked.

But, according to, "Since 2014, when the S&P closed at a new high on the day of the Nonfarm Payroll [jobs] report, over the next week it added to its gains only 22% of the time (2 out of 9 instances) with an average return of -0.9% and a remarkable 11-to-1 risk-to-reward ratio (-1.1% to +0.1%). Over the past 20 years, its most consistent performance was over the next month, with a 44% win rate, -0.4% average return, and risk of -2.4% versus reward of +1.8%."

The SPY (S&P 500 / C-fund) continued its upward thrust, moving above another level of resistance with more near 275, but of course everything is rising including the resistance lines.

The S&P 500 is now almost 600-points above its 200-day EMA, which is obviously not a common occurrence. Percentage-wise it is also extended, so no matter how you slice it, the upside seems overdone and overdue for some kind of pullback - said the guy looking for a pullback.

The weekly chart shows that it cut through the top of the long-term rising channel's resistance line like a hot knife through butter last week.

The small caps / S-fund moved begrudgingly higher, and I only say that because they struggled most of the day before that late push into the close.

The EAFE Index (I-fund) is also flying high defying all laws of gravity as it went into another gear late last week. We now have two large open gaps on the downside that I assume will get some attention in the coming weeks, if not days.

The AGG (bonds / F-fund) was down on the day as investors had no appetite for safety with the stock market running on all cylinders.

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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

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