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Market signals say stocks could go ‘flat’

A few signs are emerging that suggest the post-election stock market rally could fizzle out, causing stocks to go “flat.”

Since Donald Trump was elected president, stocks have rallied amid hopes his plans to cut corporate taxes, reduce business regulations and spend $1 trillion over a decade to fix aging infrastructure would boost U.S. economic growth and profits.

But the rally has lost momentum since the Standard & Poor’s 500 index hit a record high Dec. 13, which at the time pushed it up 6.2% since Election Day. Since then, the market has dipped slightly and traded sideways.

That “flat” trading pattern could continue, according to market signposts tracked by Schaeffer’s Investment Research. For one, the market has run into selling near big, round numbers. The Dow Jones industrial average has stalled out since climbing within 34 points of 20,000 on Dec. 14. The S&P 500 has stalled since peaking Dec. 13 and flirting with the 2300 milestone. (The S&P rallied within 1% of 2300.) “Hesitation here makes sense,” says Schaeffer’s Todd Salamone.

Another yellow flag: investor sentiment, as measured by financial newsletter writers. Currently, 59% polled by Investors Intelli

gence said they were bullish, vs. just 19% who said they’re bearish. the biggest gap between bulls and bears since July 2014. Says Salamone: “We are seeing optimism come into the market, which usually occurs prior to a sell-off or trading range behavior.”